NYS Tax Department Extends 'No Applicable ID' Option for Driver's License Requirement

By:
Chris Gaetano
Published Date:
Dec 12, 2017
nysimage

Just in time for the launch of the 2017 tax filing season, the New York State Department of Taxation and Finance (NYSDTF) confirmed, on Dec. 8, that it will continue to allow tax practitioners e-filing returns with the department to click a “No Applicable ID” box, if a client refuses to provide them with driver’s license information when they are preparing the client’s New York state income tax return. 

“This is great news for our tax practitioners,” said NYSSCPA President Harold L. Deiters III. “I’d like to thank acting NYSDTF Commissioner Nonie Manion for hearing our concerns and providing some form of relief for the practitioners who want to abide by the rules, but who do not want to risk losing clients.”

The NYSDTF announced in January 2017 that, in the interests of deterring identity theft, the department would require tax practitioners to collect and report their clients’ driver’s license information when e-filing income tax returns for the 2016 tax year. Practitioners complained that the tax department informed practitioners after tax season had already begun. The tax department responded that it normally communicated only with software developers about such changes, but that it chose to communicate with the tax preparer community after finding out that the software developers had not done any outreach on this matter. 

After a conference call with NYSSCPA leadership in February, Manion said that, for the first year, the department would allow preparers to check a box that indicated the client had no such ID, if taxpayers refuse to provide their driver’s license information.

In September, credit company Equifax announced that it had been hacked and some client driver’s license information compromised. Concerned about the implications for tax practitioners in New York, the NYSSCPA, in an Oct. 10 letter to Manion, expressed concerns that the department was going to continue the practice of requiring tax practitioners to collect and maintain driver’s license information for the 2017 tax-filing year and requested that compliance with the requirement remain optional until a more secure alternative could be implemented.

“That CPA firms are already high-value targets for hackers phishing for client data is well documented. ... To require tax practitioners to request and maintain their clients’ driver license information increases not only the risk of identity theft for the taxpayer, but it also puts the tax practitioner directly in the crosshairs of sophisticated hackers who see CPA firms as easy targets while, at the same time, [increasing] the liability of a firm," said the Society in its letter to Manion. 

In addition to Deiters, the letter was signed by New York, Multistate and Local Taxation Committee Chair Philip J. London and the Executive Director and CEO Joanne S. Barry.

In response, Manion said on Oct. 16 that she understands the sensitivity surrounding the issue, and assured the Society that the department will take every precaution to store only what is required in a secure environment and will dispose of the information when it is no longer needed. She added that the state will also only collect the first three digits of the document ID number to gather the information. The Society, in its reply, asked that the department still consider providing some form of relief for preparers by not assessing penalties for those who have demonstrated substantial compliance with the requirement at a rate that the department may determine. 

The Dec. 8 communication from the NYSDTF goes well beyond that, effectively extending, for another year, the previous option of letting practitioners check the “No Applicable ID” box, in the event that they have a client who does not want to share the information. 

“If the taxpayer refuses to provide the [driver’s license or state identification] information, the tax practitioner should mark the check box indicating that they have neither and keep contemporaneous notes regarding the good faith effort to collect the client information if we were to ask,” the department said in a statement.

What’s Required for 2017

For tax year 2017, driver’s license or state identification information is required. For married filing joint returns, information is required for both the primary taxpayer and the spouse. If a taxpayer has been issued a driver’s license or state identification card, he or she is required to provide that information to be entered into the software.

Taxpayers must provide the ID number, issuing state, issuing date and expiration date for all licenses or identification cards. If the taxpayer license/ID is a New York state driver’s license or non-driver ID, the first three characters of the document number found on the back of the license/ID must also be entered.

In the event that a taxpayer does not have a driver’s license or state-issued ID, the tax preparer will be prompted by the software to indicate this. If the taxpayer does not have either a driver’s license or state-issued ID or is deceased, marking the check box indicating that he or she has neither will fulfill the requirement.

If the taxpayer refuses to provide the driver’s license or state identification information, the tax practitioner should mark the check box indicating that he or she has neither and keep contemporaneous notes regarding the good faith effort to collect the client information, if the NYSDTF were to ask.

 

Click here to see more of the latest news from the NYSSCPA.