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Common questions on the Identity Verification Worksheet in ProSeries

by Intuit Updated 7 months ago

Starting in tax year 2015, the IRS and most states require or strongly suggest identify verification in order to protect taxpayers from identity theft and tax fraud. This verification is completed on the Identify Verification Worksheet on the Federal return so the information will flow to any state returns.

Some states have additional requirements that this information must be entered each year to show that verification was done. Due to this requirement, some specific state data may not transfer year-over-year and will need to be manually entered each year.

Follow these steps to enter the Identity Verification Worksheet in ProSeries:

  1. Open the client return.
  2. Go to the Federal Information Worksheet.
  3. Locate the Part I - Personal Information section.
  4. Click the button located immediately below the taxpayer's address to QuickZoom to the Identity Verification Worksheet.
  5. If the taxpayer or spouse doesn't have a driver's license or state ID, check the applicable Taxpayer or Spouse box in the Taxpayer/Spouse did not provide a driver's license or state id field.
  6. Scroll down to the Additional Verification Information section.
  7. In the Identity Verification Method section, mark one checkbox that best describes how the client's identity was verified.
  8. In the Documents Used to Verify Primary Taxpayer Identity section, you must select one of the following checkboxes:
    • Driver's license - requires completion of the Driver's License Detail.
    • State issued identification card - requires completion of the State ID Card Detail.
  9. If the return is filing with a Married Filing Jointly filing status, complete the Documents Used to Verify Spouse Identity section by following the same steps used for the taxpayer.
  10. Save the client return.

Introduced in tax year 2016 as part of the partnership between the IRS and state agencies to combat identity theft and tax fraud, a significantly increased focus has been placed on developing "trusted customer" features that will help ensure the authenticity of the taxpayer and the tax return.

Collectively, through the Security Summit, state agencies and the IRS identified the need for additional information to be collected and provided with the electronic return. Without the additional information, state agencies lack access to databases available to the federal government (for example, Social Security Administration), which can restrict states' ability to protect against fraud. As a result, the IRS implemented new identity verification data elements to be submitted with the electronic return. 

Through the collection of driver's license and state ID information, data is now readily available to state taxing agencies and can be shared at the state level. As a professional tax software vendor, we are required to implement the collection of the identity verification data that is reflected in the ProSeries Identity Verification Worksheet.

The IRS and state agencies, along with industry partners, continue to work together to analyze and share data to combat fraud income tax fraud. Processing protocols that are used to identify fraudulent returns have and will continue to evolve significantly throughout the season and into the future. These protocols use a variety of data to identify potentially fraudulent returns that require review. While unfortunate, valid returns can be flagged as suspicious and require review, which results in delays. The driver's license and state ID information, when provided, offers additional data the agency can use to identify the taxpayer and the return as being authentic.

While some state agencies indicate identity verification data such as driver's license and state ID info may not be required, this data is still available to the state tax agencies and can be used to prevent a return from being flagged for review, or if flagged can speed the processing and release of a taxpayer's refund. As the Identity Verification Worksheet is a protection provided to the taxpayer, we encourage you to allow your client to determine if they wish to provide the information.

Specific data captured in the Identity Verification Worksheet is required to be present in the taxpayer's electronic return.  The ProSeries 'Final Review' and error checking will alert you to missing information that is required to be present.

The federal return requires an identity verification level to be assigned to each electronic return. The identity verification level is determined by the boxes checked in the Documents Used to Verify section. One of the following selections must be marked to calculate the appropriate identity verification level:

  • Driver's license
  • State issued identification card
  • Taxpayer/Spouse did not provide a driver's license or state id

When Driver's license or State issued identification card is marked, additional details concerning the license or identity card must be entered. When Taxpayer/Spouse did not provide a driver's license or state id is indicated, additional inputs aren't required.

The IRS doesn't use this information for identity verification purposes. However, elements of the identity verification data must be present for the electronic federal return to be properly formatted. Improperly formatted returns can be rejected.

The identity verification information is provided to the state agencies through the taxpayer's federal and state return. The state agencies will use the data by matching it against state databases to authenticate the taxpayer's identity and the validity of the income tax return, when required.

If the taxpayer's identity verification information is missing, some states may reject the return.  While most state agencies won't reject the return, the taxpayer's return can be delayed when identity verification information isn't present and the authenticity of the return is in question.

New York state has indicated that No Driver's License or State ID shouldn't be used when the taxpayer has a driver's license or state ID. Alabama state requires a driver's license or state ID for all electronically filed returns.

By accurately completing the identity verification information, you assist the tax agencies by providing additional data that can be used to confirm the authenticity of the taxpayer and the tax return. As a reminder, identity verification information serves as a level of protection to avoid delays in processing the taxpayer's return. If you (as the tax preparer) decide for your tax client, or make a business decision to not collect the driver's license or state ID details, you must mark the Taxpayer/Spouse did not provide a driver's license or state id box.

Unfortunately, the Identity Verification Information won't transfer from year to year. Since collection of this information is implemented as a precaution to protect against fraud, the taxing agencies require this information to be confirmed with the taxpayer and reentered each tax year.

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