IRS Issues Proposed Regulations in Effort to Reduce Identity Theft

The Internal Revenue Service (IRS) recently issued proposed regulations that would permit employers to voluntarily truncate employees’ social security numbers (SSNs) on, for example, copies of Forms W-2, Wage and Tax Statement, that are furnished to employees in an effort to reduce identity theft. Truncated taxpayer identification numbers (TTINs) are the first five digits of the nine-digit SSN replaced with asterisks or XXXs in the following formats: ***-**-1234 or XXX-XX-1234.

To ensure accurate wage information is received by the Social Security Administration (SSA), the regulations do not permit TTINs on Forms W-2 that are being sent to that agency or to the IRS. They are also not allowed on Forms W-2 being provided on a statement furnished to the employer of a payee who received sick pay from a third party, because Sec. 6051(f)(1)(A)(i) specifically requires the statement to contain the employee’s SSN.

However, the TTINs may be used on Forms W-2 being provided by employers to employees that report third-party sick pay in accordance with the general rule governing the reporting of wages to employees on Forms W-2 under Code Sec. 6051(a), because Code Sec. 6051(f)(2) does not specifically require the use of an SSN. Truncated numbers may also be used for reporting wages paid in the form of group term life insurance.

The proposed regulations would amend Reg. § 301.6109-4 to clarify that truncation is not allowed on any return, statement, or other document that is required to be filed with or furnished to SSA under the internal revenue laws.

If the proposed regulations are finalized without change, the IRS intends to incorporate the revised regulations into forms and instructions. The proposed regulations would be applicable for statements required to be filed and furnished under Code Sec. 6051 and Code Sec. 6052 after December 31, 2018.


CATEGORIES: Featured | Tax & Audit
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