A growing number of states and other entities will continue this coming season to require driver’s licenses from taxpayers who want to e-file state returns.
New York has become one of the latest states to institute the requirement. Beginning with tax year 2016, if a taxpayer has a driver’s license or state-issued ID (non-driver ID), the related information is required for New York State personal income tax returns that are prepared using software. The requirement applies to driver’s licenses or state-issued IDs from any state.
States such as New York and Louisiana already use driver’s license suspension as one tool to get citizens who owe back taxes to pay up. Other states are beginning to request license information – so far often on a voluntary basis – as an offshoot of IRS initiatives to fight unprecedented ID and refund fraud.
(So far, taxpayers don’t need a driver’s license or other state-issued ID to file a federal return.)
Ohio, for example, will require driver's license information for the primary taxpayer and spouse (if married filing jointly) beginning in tax year 2016. Ohio taxpayers who don’t have a driver's license or state ID card will have the option to indicate such and still be allowed to e-file.
Alabama is also requiring information from a taxpayer’s driver's license or state-issued identification card to file. The state is also using a five-minute “ID Confirmation Quiz” to help fight ID and refund theft.
Voluntary – and maybe quicker
Kansas, California and Wisconsin are among states requesting but not requiring a driver’s license to process a state return.
“We ask that you provide the requested California driver license or state-issued identification card information when completing your tax return,” reads the California Franchise Tax Board’s FAQ page for individual filers. “Providing this information is voluntary. We will not reject your return if you do not provide the requested driver license or state-issued identification information. However, providing this information may help us to process your tax return more quickly.”
In Illinois, a driver’s license is one of the forms of ID taxpayers need to file online using state tax department-approved commercial software or Web-based applications.
The license issue is feeding a nationwide rumor mill. The New Jersey Society of CPAs was curious enough about needing driver’s licenses in its state that in January 2016 the group secured and posted to Facebook this response from acting director of the New Jersey Division of Taxation John Ficara: “Since last summer, the Federation of Tax Administrators, the IRS, and the tax preparation software industry have been working together to establish more robust security measures for the detection and prevention of refund fraud. These security measures include several new data elements, both required and optional, to be provided by the taxpayer when utilizing tax preparation software to complete and file income tax returns. Driver license information will be an optional data element when filing electronically this year.”
“However,” the society added, “although the state is not requiring driver license information, NJCPA members are reporting that some of the tax software e-file companies are requiring it. Please check with your software provider to find out what their requirements are.”
The society confirmed that driver's license numbers will remain optional in 2017, and also discovered that they will be optional in neighboring Pennsylvania, as well.
States such as Virginia also ask filing-software vendors to obtain such authentication information as driver’s license numbers.