IRS Offers Tax Relief for Pre-Breach Identity-Protection Services

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Dec. 30—Employers that provide identity-protection services to employees do not have to include the value of the benefit in employees’ wages and gross income, the IRS said in Announcement 2016-02.

Additionally, employers do not have to report the amounts on an information return, the IRS said.

The provision does not apply to cash received in lieu of identity-protection services or to proceeds received under an identity-theft insurance policy, the IRS said.

In August, the IRS provided some tax relief for identity-protection services provided after a breach and received requests to expand the relief to services provided before a breach to “allow earlier detection of a data breach and minimize the impact of a breach on operations.” Notice of the tax relief was made in Announcement 2015-22.

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