In an effort to reduce identity theft, the IRS issued proposed regulations that would permit employers to use truncated taxpayer identification numbers (TTINs) on Forms W-2, Wage and Tax Statement, issued to employees. Permissible TTINs are Social Security numbers (SSNs) with the first five digits of the nine-digit number replaced with asterisks or XXXs in the following formats: ***-**-1234 or XXX-XX-1234.
Although this change was effective on the date of enactment, December 18, 2015, the IRS is delaying the effective date of the proposed regulations until Jan. 1, 2019 to allow state tax administrators to prepare for the changes. The IRS is also requesting comments on the proposed regulation by Dec. 18.
To ensure accurate wage information is received by the Social Security Administration, 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.
But TTINs may be used on Forms W-2 being provided by employers to employees that report third-party sick pay because that is permitted by statute. Truncated numbers may also be used for reporting wages paid in the form of group term life insurance.
Not to sound like a cynic, I’m not sure how this proposed regulation will have a significant impact on limiting identity theft. Since employers are required to show the SSN on W-2s sent to the IRS and SSA, if a hacker breaks into an employer’s data base, wouldn’t the full SSNs still be at risk.? The same would hold true if the IRS or SSA were hacked.
It has been rumored that the IRS is looking into replacing SSNs with some other form of identification numbers. I’m not sure how this helps prevent ID theft. A number hacked is a number hacked. Perhaps the IRS is relying upon the ID cyber security advice it is receiving from its former security consultant, Equifax.
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