New IRS Identity Verification Rules Have Generated Many Questions

The IRS has developed new Identity Verification Requirements for E-Filed returns in an attempt to combat identity theft.  IRS Publication 1345 (April 2014) sets forth the procedures that a practitioner must follow to verify a client’s identity.  The new requirement that tax professionals inspect valid governmental ID and record their findings for even in-person e-filed transactions has raised a number of questions and concerns.

Here are the new rules as set forth in Pub. 1345:

Identity Verification Requirements

The electronic signing process must be associated with a person.

The identity verification requirements must be in accordance with National Institute of Standards and Technology Special Publication 800-63, Electronic Authentication Guideline, Level 2 assurance level and knowledge based authentication or higher assurance level.

For In-Person Transactions

The electronic return originator (ERO) must inspect;

  • A valid government picture identification
  • Compare picture to applicant
  • Record the name, social security number, address and date of birth.
  • Verify that the name, social security number, address, date of birth and other personal information on record are consistent with the information provided through record checks with the applicable agency or institution or through credit bureaus or similar databases.
Note:  For in-person transactions, the record checks with the applicable agency or institution or through credit bureaus or similar databases are optional.
 

Examples of government picture identification (ID) include a driver’s license, employer ID, school ID, state ID, military ID, national ID, voter ID, visa or passport.

If there is a multi-year business relationship, you should identify and authenticate the taxpayer

For Remote Transactions

The electronic return originator must:

Record the name, social security num­ber, address and date of birth.

Verify that the name, social security number, address, date of birth and other personal information on record are consis­tent with the information provided through record checks with the applicable agency or institution or through credit bureaus or similar databases. THIS IS NOT OPTIONAL.

Identity Verification Failure

If an ERO is unable to complete identity verification after three attempts, the ERO must obtain a handwritten signature.

The new identity verification rules create difficult issues for tax preparers, and leave many questions unanswered.  CALT is being proactive in gathering questions from practitioners to be elevated within IRS to see if we can get answers NOW rather them in the middle of filing season. Please send any question that you may have to Kristy at ksmaitre@iastate.edu.  She will compile the questions and submit them to the Minnesota IRS Stakeholder Liaison group.  Hopefully, in turn, the Minnesota Stakeholder Liaison will send the questions on to IRS headquarters in Washington, D.C.