Some Taxpayers May Need Prior-Year Tax Data

FROM THE IRS | IR 2018-30 | February 19, 2018

The Internal Revenue Service reminded taxpayers who have changed tax software products that they may need information from their 2016 tax return to complete their taxes this year.

It’s always a good idea to keep copies of previously-filed tax returns. That recommendation is more important this year because, for some taxpayers, certain data from the 2016 tax return – the adjusted gross income -- will be required to validate their electronic signature on their 2017 tax return due April 17.

Taxpayers often call or visit the IRS seeking their prior-year tax transcript, which is a record of their tax return. But the days around Presidents Day mark the busiest time of the year for the IRS, and there are online options that are faster and more convenient for taxpayers.

Taxpayers can avoid the rush by always keeping copies of their tax returns, generally for the past three-to-six years depending on the type of return filed. Alternatively, taxpayers may try to locate their 2016 tax return from their previous year’s tax preparation software or tax return preparer. Or, they may use online tools to access their tax transcript.

The electronic signature is the way the taxpayer acknowledges that information on the tax return is true and accurate. Validating the electronic signature by using prior-year adjusted gross income is one way the IRS, state tax agencies and the tax industry work to protect taxpayers from identity thieves.

Generally, for returning users, the tax software product will carry over the prior-year information and make for an easy, seamless validation process. However, taxpayers using a new tax software product for the first time may be required to enter the information manually.

Here’s the way the electronic signature and signature validation work:

  • Taxpayers sign their returns electronically by creating a four-digit Personal Identification Number (PIN), also known as a Self-Select PIN. To validate that e-signature PIN, taxpayers must enter their birthdates and either their adjusted gross income from the prior-year return or the prior-year Self-Select PIN.
  • If taxpayers have kept a copy of their prior-year tax return, completing this task is easy. On the 2016 tax return, the Adjusted Gross Income (AGI) is on line 37 of Form 1040; line 21 on Form 1040-A; or line 4 on Form 1040-EZ.
  • If a copy of their 2016 tax return is not available, taxpayers may be able to obtain a copy from their previous year’s tax preparation software or previous tax preparer.
  • Taxpayers may also obtain a tax transcript online from the IRS.
    • Use Get Transcript Online to immediately view the AGI. Taxpayers must pass the Secure Access identity verification process. Select the Tax Return Transcript and use only the “Adjusted Gross Income” line entry.
    • Use Get Transcript by Mail or call 800-908-9946. Taxpayers who fail Secure Access and need to request a Tax Return Transcript can use the mail option.  Allow 5 to 10 days for delivery. Use only the “Adjusted Gross Income” line entry.
Taxpayers who have been issued an Identity Protection (IP) PIN should enter it when prompted for an IP PIN by the software. The IP PIN will serve to verify the taxpayer’s identity. If the taxpayer has never filed a tax return before and is age 16, enter zero as the AGI.

As the IRS, state tax agencies and the tax industry have made progress against tax-related identity theft as part of the Security Summit effort, cybercriminals try to steal more personal information to file fraudulent tax returns. They know that just stealing a name, address and Social Security number is not enough information to commit tax fraud.

This is one reason why some states in recent years have required taxpayers to enter their driver’s license number on electronically-filed tax returns. States can match taxpayers to the driver’s license database and help validate the return. 

Many software companies, working in conjunction with state authorities, require taxpayers to answer the request for a driver’s license number in one of three ways: 1) provide the information as requested, 2) indicate that the taxpayer lacks a driver’s license or state-issued photo ID, or 3) indicate that the taxpayer chooses not to provide the information. Taxpayers must complete the field with one of these three answers.  

The IRS does not require a driver’s license number on a federal tax return.

When taxpayers or tax professionals are prompted for additional information, such as a driver’s license number, providing this detail will help stop tax-related identity theft. Identity validation and identity proofing are keys to ensuring that refunds go only to the legitimate taxpayer.