Volume 6, Number 2, Summer-Fall 1997
The Immigration and Naturalization Service (INS) is not the only agency checking on employee identifiers. Increasingly, the Social Security Administration (SSA) is using its computer systems to find numbers on employer tax returns that either are invalid or are registered to individuals different from those named on the return.
Employers who file 250 or more W-2s for a tax year are required to provide the information on personal computer diskettes or magnetic tape. The names and social security numbers (SSNs) on magnetic-media W-2 reports are now being checked against the SSA's records during processing.
This year, the SSA began returning the reports to employers without processing them if 70 percent or more of the W-2s were "bad"- either the social security number on the W-2 was never issued by the SSA, or the social security number was valid, but the name on the W-2 did not match the name on SSA's records. The SSA advised employers whose files were rejected to phone to discuss how to get their 1996 W-2s processed and prevent future problems. The 70 percent reject threshold that applied to 1996 W-2s will be lowered for 1997 W-2s.
Employers over the threshold will probably be encouraged to use the SSA's Enumeration Verification System. This free service enables employers to compare payroll records of employee names and social security numbers with SSA's records to verify their accuracy before completing Forms W-2. Verification can be requested on any worker for whom a W-2 will be prepared - a current, former, or new employee (after a commitment to hire has been made).
The social security card is only one of the documents that a new hire may choose to show in proving U.S. employment eligibility and completing the Form I-9. If the employee presents one of the others, the social security card can be specifically requested after the hiring process to assist in accurate entry of name and social security number into personnel records.
The Internal Revenue Code provides for a penalty of $50 per W-2 for the inclusion of incorrect SSNs or for missing numbers, although these regulations are not being enforced at present, according to Bill Brees, SSA Regional Magnetic Media Coordinator, San Francisco. That is no guarantee, however, that IRS penalties will not be imposed for incorrect 1997 W-2s. Any failure to file a correct information return due to intentional disregard of the filing requirements is subject to a minimum penalty of $100 per W-2; there is no maximum penalty.
Also, the Social Security Administration is now required to notify the Immigration and Naturalization Service of any earnings reported on or after January 1, 1997, on a social security account number issued to an alien not authorized to work in the United States. The SSA must give the INS the "name and address of the alien, and the name and address of the person reporting the earnings and the amount of the earnings."