EMPLOYERS: USE THIS FREE CHECKLIST TO REVIEW PAYROLL SECURITY BEFORE W-2S GO OUT.
Quick Review: November and December bring a busy mix of year-end payroll, benefits updates, and W-2 preparation. These processes involve sensitive employee information, including Social Security numbers. Before W-2s are issued in January, employers can review system access, strengthen account controls, check payroll-provider practices, confirm secure delivery procedures, and remind staff how to verify unexpected requests.
A New Channel for Evaluating Tax Identity Protection
As payroll and human resources teams prepare year-end records, employee data may be handled across internal systems, provider portals, and file-sharing channels. That activity creates more opportunities for sensitive information to be exposed through excessive access, weak account security, or a misdirected document.
The potential consequences extend beyond the organization. Stolen W-2 information can be used in attempts to file fraudulent tax returns or misuse personal information. Employees may also face uncertainty and additional work if their tax identity is misused.
The IRS advises businesses to safeguard sensitive data and warns about scams that target payroll and HR staff. A year-end review can help employers understand where employee information is held and whether their existing procedures are ready for W-2 season.
Why the Weeks Before W-2 Distribution Matter
W-2 preparation brings together wage and tax information that employers handle throughout the year. Payroll runs, benefits administration, employee-record updates, and provider access may all be active at the same time. Reviewing security before distribution gives teams an opportunity to check who can access the data, how it moves, and how employees will receive their forms.
The IRS and its Security Summit partners have warned about business email compromise, a type of scam in which an email appears to come from a company executive or another trusted person. In one known version, a message asks payroll or HR to send employee W-2s or a list of employees’ personal information.
An urgent request is not proof of fraud, but familiar names and routine business timing are not proof that a request is legitimate either. Written procedures for verifying unusual requests can help employees respond consistently.
Year-End Payroll Security Checklist for Employers
1. Review who can access employee SSN data
Start by identifying where Social Security numbers and W-2 information are stored. Include payroll and HR systems, shared folders, paper records, email attachments, backups, and payroll-provider platforms.
Then review user access across both the organization and its service providers. Apply the principle of least privilege, which means giving each person access only to the information needed for their job. Remove access for former employees, contractors, or staff who no longer require it, and use individual accounts rather than shared credentials.
Consider documenting:
- Which roles can view, download, edit, or export employee tax data
- Who approves access changes
- Whether access is logged and periodically reviewed
- How sensitive paper records and downloaded files are stored
- How outdated records and devices are securely disposed of
The IRS’s Publication 4557, Safeguarding Taxpayer Data, includes practical guidance on access controls, security planning, employee training, and service providers.
2. Require multifactor authentication on payroll and HR systems
Multifactor authentication (MFA) requires more than a password to sign in, such as a code from an authenticator app or a hardware security key. Enable MFA for payroll, HR, email, cloud storage, and any account that can access employee tax information.
Use the strongest available sign-in options, especially for administrators and users who can download or change payroll records. Review account recovery methods, too. A secure login can be undermined if password resets or account recovery rely on an outdated phone number or an unmonitored email account.
3. Verify your payroll provider’s security and contract terms
A payroll provider may handle sensitive information on the employer’s behalf, but the employer should still understand the provider’s controls and responsibilities. Before year-end processing, review current security documentation and ask specific questions about how the provider safeguards employee data.
Confirm whether the provider uses MFA, limits staff access, encrypts data, monitors account activity, and reviews access regularly. Also check how the provider will notify the organization about a suspected or confirmed incident.
Review the contract for breach notification terms, meaning the agreed process and timing for informing the employer about a data incident. Confirm who the provider will contact, what information will be shared, and how the parties will coordinate communications. The IRS recommends selecting service providers that can maintain appropriate safeguards and overseeing their handling of sensitive information.
4. Lock down W-2 distribution
Decide how W-2s will be delivered and confirm that the process protects employee information. For electronic delivery, use the payroll provider’s authenticated portal rather than sending forms as ordinary email attachments.
Employers may encourage electronic delivery for convenience, but employees must receive the required disclosures and provide affirmative consent before a W-2 is furnished electronically. Employees who do not consent must receive a paper statement. Review the provider’s process for consent, access, and withdrawal, along with how long forms remain available.
For paper distribution, verify mailing addresses, control access to printed forms, and establish a process for returned or unclaimed documents. Remind employees to access W-2s through a known company or provider portal, not through a link in an unexpected message.
5. Train staff on January W-2 and IRS impersonation scams
Give payroll, HR, finance, and help-desk teams a short refresher before year-end processing begins. Cover requests for W-2s, employee lists, SSNs, dates of birth, addresses, or earnings summaries, especially when they arrive with urgency or claim to come from an executive.
Set a clear rule: verify unusual requests using a separate, trusted channel, such as a known phone number or internal approval system. Staff should not reply to the questionable message or use contact details provided in it to confirm the request.
Also remind employees that the IRS does not initiate contact by email, text, or social media to request personal or financial information. The IRS provides specific instructions for W-2 and SSN data theft affecting businesses and payroll providers, including how to report a scam email or data loss.
6. Confirm business EIN and IRS account records
Employers should confirm that key business account information is accurate and that access is limited to authorized people. Review the organization’s employer identification number (EIN), legal business name, mailing address, responsible-party details, and the people authorized to manage relevant IRS business accounts.
Eligible businesses can review available records and manage authorized access through the IRS Business Tax Account. If the business address or responsible party has changed, consult the IRS instructions for Form 8822-B, Change of Address or Responsible Party.
As part of the review, confirm that no unexpected changes have been made to business account details or access. If a record does not match the organization’s information, use official IRS channels to determine the appropriate next step.
Findings: A Practical Pre-W-2 Review
Before January distribution, employers can use this short list to confirm that year-end procedures have been reviewed:
- Access: Identify where SSNs and W-2s are stored and who can access them.
- Authentication: Enable MFA on payroll, HR, email, and related accounts.
- Provider diligence: Review safeguards, incident contacts, and breach notification terms.
- Delivery: Confirm electronic consent and secure portal access, or procedures for paper delivery.
- Staff readiness: Train payroll and HR teams to verify unusual requests independently.
- Business records: Check EIN-related account details and authorized users through official IRS resources.
These steps do not guarantee that information will never be misused. They can help an organization establish clearer safeguards and a more coordinated process for handling sensitive payroll data.
Where Identity Theft Protection Services May Fit
Employer security practices focus on how the organization handles employee information. Identity theft protection services address a different need: helping individuals monitor for certain forms of suspicious activity and access support if a concern arises.
Tax Guardian continuously monitors IRS accounts for suspicious activity and provides alerts. Recovery support is available for eligible plans. Employer-sponsored Protect+ is available beginning at 100 employees for $17,940 annually, equivalent to $14.95 per employee per month. Employers can review current details and ask questions through Tax Guardian’s contact page.
A protection service is not a substitute for payroll safeguards, secure W-2 distribution, or careful vendor review. Employers considering a benefit should review the service scope, privacy terms, plan details, and employee communication needs. More background is available in this guide to employee tax identity theft protection for employers.
Set the Stage for a More Secure W-2 Season
A structured review before W-2 distribution can help employers clarify responsibilities across payroll, HR, IT, and outside providers. Reviewing access, authentication, provider terms, delivery practices, staff training, and IRS business records gives the organization a practical starting point for handling year-end data with care.
Tax identity theft remains a concern even when organizations use safeguards. Clear procedures and informed employees can make it easier to recognize suspicious requests and know where to turn for reliable guidance.
Frequently Asked Questions
When should employers review payroll security before W-2s go out?
A review in November or December gives payroll, HR, IT, and provider contacts time to confirm processes before forms are distributed in January. Organizations can also schedule periodic access reviews during the year.
Can an employer email W-2s to employees?
Electronic furnishing is permitted when the employer follows IRS requirements, including providing required disclosures and obtaining the employee’s affirmative consent. Employers should use a secure method and provide a paper statement to employees who do not consent.
What should staff do if an executive emails asking for employee W-2s?
They should pause and verify the request through a separate, known channel before sharing any information. Organizations should have a written approval process for unusual or sensitive data requests.
Does identity theft protection replace payroll security controls?
No. Identity theft protection services and employer security controls serve different purposes. Monitoring and recovery support do not replace secure handling of employee records, careful W-2 delivery, or vendor oversight.
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IRS Sources
- IRS Publication 4557: Safeguarding Taxpayer Data
- IRS guidance on W-2 and SSN data theft for businesses and payroll providers
- Security Summit warning about W-2 scams targeting payroll and HR
- IRS Business Tax Account
- IRS Form 8822-B information
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