Original W-2s

[Snaggletooth]

Electronic filing regulations have from the beginning required scrutiny of W-2 forms that were not originals. Of course it's easy to create your own with cheapo software, but for handwritten, photocopied, etc. these regulations have obviously tried to get EROs to reject W-2s that don't look like they are originals.

Many employers have now given their employees passwords to download their own W-2s from employer websites. Cuts down on the nuisance of employees disrupting the payroll department and getting copies because "they lost the first one" or "never did get one," etc.

ERO can no longer tell the difference.

Comments? Or is this something low on the "worry" priority?

[BHoffman]

Don't worry. Be happy.

I'm not at all worried about this. Anyone can buy W2s at any office supply store. How would the IRS be able to prove the ERO acted recklessly if presented with a valid looking W2? I think the IRS would apply this to ERO's who are abusing the system and filing with no W2 at all, or making one in their office from the taxpayers last paystub, or doing some other kind of dirty trick. The IRS wants people to efile. EROs help them comply.

[Koss]

Original Document

I agree with BHoffman. Just a couple observations...

Your software should have a field that can be used to identify a W-2 as "nonstandard." Doing so will not prevent you from e-filing the return. And identifying a W-2 as nonstandard is not the same as preparing a substitute Form W-2 using a final pay stub.

Nonstandard has a formal definition. I believe it is a Form W-2 that is handwritten, typewritten, or altered.

By typewritten, they mean literally prepared with a typewriter--not computer generated.

But you can also use the nonstandard designation to flag the W-2 if you consider it suspicious or potentially fradulent for some other reason.

In other words, anything prepared using software is considered standard and is acceptable, unless it has an obvious badge of fraud.

As we move into the "digital age," we are going to see more and more of this particular issue, in almost every aspect of life--not just taxes and finance. And what I mean is this:

We are reaching the point where it is no longer clear what is or is not an original document. In some cases, the original document may be an electronic document, and anything on paper is technically a duplicate or copy.

Brokers are pressing clients to "go paperless," meaning that they never get a paper copy of their Form 1099-B. The original document is delivered to the client as a PDF, because the client consented to electronic delivery. So what the client prints is technically a copy.

For what it's worth: It appears that folks who use consumer software to file electronically are no longer required to submit paper copies of Form W-2 to the IRS. If they sign electronically using their PIN from the prior year, or their AGI from the prior year, they don't have to mail anything; if they don't know their PIN or their AGI, then they have to sign and mail Form 8453-OL after filing the return. But they don't mail Forms W-2.

EROs are no longer the gatekeepers. If someone really wants to file a fraudulent return by inflating the withholding on a W-2, or by filing a fictitious W-2, they can do it through an ERO or they can do it on their own. The IRS will eventually catch them either way.

[joanmcq]

I have out of state clients that fax or email PDFs of their docs, including W-2s to me. I don't really have any reason to doubt them, and I never see the original. If I had a storefront, I'd be more suspicious.

I had an audit where the auditor literally would not accept a downloaded check stub...she insisted 'anything on a computer could be faked'. Problem was, the company did not distribute paper checkstubs; everyone was on direct deposit and their paystubs were available online. She had to get a letter from the company on letterhead stating the expenses she deducted were actually paid.

[Jiggers]

Typewritten W-2's

There are many businesses and farms in my small hick town that still type their W-2's. Can't afford or don't know how to use a computer!

Are we to question those?

[Koss]

Typewritten

Perhaps in the context of a small town in a rural area, a typewritten Form W-2 would not be considered nonstandard, particularly if you know the business owner, or if you have been doing the client's return for a few years, and the client had the same type of document last year...

If you know it's legit, then I don't think you have to question it or treat it as potential fraud. But if you want to strictly adhere to the IRS guidelines for EROs, I think technically you still need to identify it as nonstandard in your software.

[Koss]

I had an audit where the auditor literally would not accept a downloaded check stub...she insisted 'anything on a computer could be faked'. Problem was, the company did not distribute paper checkstubs; everyone was on direct deposit and their paystubs were available online. She had to get a letter from the company on letterhead stating the expenses she deducted were actually paid.

This is a great example of what I'm talking about. I don't think this sort of thing is adequately addressed by any IRS regs or guidelines, or even by GAAP, for that matter. And I'm certainly not recommending that anyone rush to formulate concrete rules, because that would probably produce more burden and unintended consequences.

But Joan's example illustrates very well my original point. In some contexts, it is no longer clear what is an original document. And to some extent the auditor is right. It is extremely easy to construct fraudulent documents using various types of software.

I have one client, for example, that owns a couple single family homes that are rental property. If he has the furnace serviced, or calls in an electrician, he may get some guy that is still using handwritten, no-carbon-required work orders or invoices. The repairman will write up an invoice right there in the kitchen of the rental property, using one of those metal clipboards that has a compartment inside. Sometimes the guy will have customized invoices that bear the name of the repair service. Others are using generic, blank order forms that you can still buy at Staples or OfficeMax.

Are these handwritten documents somehow more original or authentic than, say, an invoice generated using Quicken or Quickbooks? Either one can be fake. And I don't think one or the other is easier; it just depends on the resources available to the person who wants to fake it.

The more interesting question is this: Suppose my client with the rental property keeps his books using Quicken, accurately logging all the income and expenses for the rental property. Does he really have to keep the original receipts? What about scanned images? What if one his service providers sends him an invoice by e-mail?

If the income and expenses tracked by Quicken properly match up with a checkbook register, which might also be within Quicken, and the register matches the bank statements, would this be sufficient for most IRS auditors?

But even the bank statements could be delivered to the client online...

Returning to Joan's story, how did the IRS auditor know that the letterhead wasn't fake?? LMAO

I've made my point. My intent was not to dispute anything anyone else said in this thread, but rather to illustrate that when it comes to electronic documents, we may be moving into uncharted territory in some areas...

[Snaggletooth]

Thanks to Everyone

Joan and Burton, even though the auditor is turning over every stone, he is still a dork.

It is possible to fake anything. Anything from a W-2 to a letterhead.

But the taxpayer is making every reasonable attempt to comply, and has furnished reasonable evidence. If the auditor is suspicious of anything further, he should arrange to audit the source (the company) and leave Joan's taxpayer alone.

Thanks to everyone who has responded.