Proposed IRS Regulation Would Permit Truncated SSNs on Forms W-2

September 21, 2017

The Internal Revenue Service (IRS) has issued proposed regulations (REG-105004-16) to allow employers to truncate employees’ Social Security Numbers on copies of Forms W-2 that are furnished to employees. The proposed regulations are included in the Federal Register dated Sept. 20, 2017.

Background

Section 409 of the Protecting Americans from Tax Hikes (PATH) Act of 2015 (P. L. 114-113) authorized the IRS to permit employee Social Security Numbers (SSNs) to be truncated on Forms W-2 (e.g., XXX-XX-9999). However, IRS regulations were necessary to implement the provision.

Employers May Truncate Social Security Numbers (SSNs) on Employee Forms W-2

The proposed regulation explains that “To aid employers' efforts to protect employees from identity theft, these proposed regulations would permit employers to truncate employees' Social Security Numbers (SSNs) on copies of Forms W-2, Wage and Tax Statement, that are furnished to employees so that the truncated SSNs appear in the form of IRS Truncated Taxpayer Identification Numbers (TTINs). A TTIN is formatted as XXX–XX–1234 or ***–**–1234.”

The proposed regulations also permit truncated SSNs on Forms W-2 to report third-party sick pay or group-term life insurance. However, employers are not permitted to truncate their Employer Identification Numbers (EINs) on Forms W-2 furnished to employees. In addition, employers may not truncate SSNs on Forms W-2 that are filed with the Social Security Administration.

The regulations are permissive, so employers are not required to truncate SSNs on Forms W-2. One consideration is that some states may require the full SSN to be printed on employees’ state copies of Forms W-2. States may need time to make changes to legislation, regulations, or forms and instructions. State copies of Form W-2 are generally in the same envelope, if not on the same page as the federal Form W-2.

The proposed regulation explains that state tax administrators had asked for transition time to modify affected state income tax return processing systems. Consequently, these changes are expected to apply to Forms W-2 furnished after December 31, 2018 (i.e., 2018 Forms W-2 furnished and filed in early 2019).

ADP Compliance Resources

ADP maintains a staff of dedicated professionals who carefully monitor federal and state legislative and regulatory measures affecting employment-related human resource, payroll, tax and benefits administration, and help ensure that ADP systems are updated as relevant laws evolve. For the latest on how federal and state tax law changes may impact your business, visit the ADP Eye on Washington Web page located at www.adp.com/regulatorynews.

ADP is committed to assisting businesses with increased compliance requirements resulting from rapidly evolving legislation. Our goal is to help minimize your administrative burden across the entire spectrum of employment-related payroll, tax, HR and benefits, so that you can focus on running your business. This information is provided as a courtesy to assist in your understanding of the impact of certain regulatory requirements and should not be construed as tax or legal advice. Such information is by nature subject to revision and may not be the most current information available. ADP encourages readers to consult with appropriate legal and/or tax advisors. Please be advised that calls to and from ADP may be monitored or recorded.

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Updated on September 21, 2017

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