W-2 Verification Code Program is Expanding

I am not sure how many business owners are aware of this pilot program that started in 2016, but it is expanding to help with identity theft. Scott Mezistrano, from the IRS Industry Stakeholder Engagement and Strategy, provided updated information on the W-2 Verification Code Pilot Program for the 2018 filing season (2017 Forms W-2).

First, just a quick review of the program itself. The purpose of this program was to combat tax-related identity theft and tax refund fraud. The program was implemented during the 2016 filing season. It requires a 16-character code be input into box 9 so that the tax filer can be verified when filing taxes electronically. It only appears on the Form W-2 copies B (filed with the employee’s federal tax return) and C (the employee’s copy). If the Verification Code (VC) is deemed valid, then the IRS treats the W-2 data submitted with the Form 1040 to be valid, thereby reducing false fraudulently filed tax returns.

For the 2016 Forms W-2 only ADP, Ceridian, Intuit®, Paychex, Payroll People, Prime Pay and Ultimate Software participated in the test pilot program. If the taxpayer had a VC, it was entered 34 percent of the time. However, when it was entered, it was validated 97 percent of the time.

For the 2017 Forms, W-2 there will be 10-12 service bureaus or payroll software companies participating in the program. This includes the same companies as in 2016 along with the National Finance Center and a few more payroll service providers. This should result in approximately 66 million Forms W-2 containing the code. That results to about one in four forms that will be filed.