United States

More states requiring driver's license data as e-file fraud protection


Taxpayers and preparers may be required to provide state driver’s license information as an increasing number of states include the mandate in order to e-file state returns. In the past few years, the progression of technology and ease of e-filing has created convenience for both states and taxpayers. However, the growing issue of identity theft and refund fraud is pushing states to impose additional safeguards to protect against tax return fraud.

In a report published by the U.S. Government Accountability Office, the IRS estimated it prevented or recovered over $22 billion from being paid out in refund fraud situations in 2014. While this is a significant success for the IRS, the agency still paid out over $3.1 billion to fraudulent tax returns.

Currently, driver’s license information is not necessary to file a Federal tax return, however, the IRS has imposed other measures to combat identity fraud, including an Identity Protection Pin for those who have been subject to fraud in the past. States, on the other hand, are more slowly imposing a requirement for driver’s license or state issued ID information to e-file state tax returns.

Ohio is one of the latest states to require a driver’s license or state-issued ID to e-file income tax returns. The new 2016 ID requirement is the most recent method Ohio has implemented to fight refund fraud. Other states imposing ID requirements include Alabama, Illinois and New York. In these states, unless the taxpayer does not hold a driver’s license or state issued ID, an e-filed tax return could be rejected or delayed without the license information, even if no refund is requested.

The majority of other states are asking taxpayers to voluntarily provide their driver’s license information to help combat fraud and expedite the refund process. In these instances, a tax return should still be accepted without the license information.

Although not all states have a driver’s license requirement at this time, the increasing rate of identity theft may force more states to implement the safeguard as a security measure. Taxpayers and tax preparers should review each state’s filing requirements and be prepared to collect this information in order to avoid unnecessary delays in filing tax returns and receiving refunds. 

Brian Kirkell


Brian provides advanced technical analysis of state and local tax issues important to middle market businesses. Reach him at brian.kirkell@rsmus.com.

Areas of focus: Washington National TaxState and Local TaxOnline and Remote Seller Sales Tax

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