Using the W-2 Verification Codes

If you’re a tax preparer, you’ve likely heard of the new verification code added to Form W-2s this tax season. The IRS has added this extra level of protection to 50 million W-2s as an experiment to combat fraud and protect businesses and taxpayers from identity theft.

The verification code consists of 16 digits, and taxpayers will be required to enter the code on their W-2 when filing an electronic return. The location of the code will vary, so preparers are reminded to look for the verification code throughout the W-2.

Since this is a test in the beginning phases, returns submitted with incorrect or omitted verification codes will not be delayed in processing. Additionally, the code will not be found on data submitted to the Social Security Administration, or any local or state department of revenue. The experiment does not extend to state or local income tax returns, and has no effect on federal returns filed by paper.

The purpose of this test is to verify authenticity of the information provided by taxpayers when they e-file their individual income tax return. The IRS has rolled this pilot program out to certain payroll service providers, which have included a 16-digit code, as well as a new field titled “Verification Code” onto a limited number of Form W-2s. In 2017, around 50 million W-2s will be sent with the code, which is increased significantly from 2016, when only 2 million forms had the code.

You’ll recognize the new verification code, as it will be broken into four groups of four alphanumeric characters, separated by hyphens. Think: XXXX-XXXX-XXXX-XXXX.

Some payroll companies will find the code listed on copies B and C of the W-2, in its own box. Copy B is filed with the ’s return, while copy C is saved for employee records.