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The US Internal Revenue Service (IRS) has provided guidance on the 16-digit Verification Code that will be a new entry on Forms W-2 (Wage and Tax Statement) to be received by taxpayers in early 2017.
The expanded use of the W-2 Verification Code is part of an effort by the Security Summit, which consists of the IRS, state tax agencies, and the tax preparation industry, to protect taxpayers and strengthen anti-fraud efforts. For 2017, the code will be placed by on 50m Forms W-2 prepared by payroll service providers, up from 2m forms in 2016.
The use of the Verification Code is a way to validate the wage and tax withholding information on the tax form. Adding the code when filling out their taxes helps the IRS authenticate the taxpayers' information. In turn, this helps protect against identity theft and unnecessary refund delays.
Taxpayers have been asked to use the W-2 Verification Code when preparing their returns online, or to make sure their tax preparers enter it. If the Code is not included, a tax return will still be accepted, but initial results indicate its entry shows promise in reducing tax fraud. Identity thieves sometimes file false Forms W-2 to support their fraudulent tax returns.
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