As noted in a July 2018 Eye on Washington, the Social Security Administration (SSA) will mail letters to employers that filed 2018 Forms W-2 containing employee names and Social Security numbers (SSNs) that did not match SSA's records, beginning in the last week of March 2019. This letter will be mailed to any employer that had one or more SSNs/names that did not match SSA's records. Letters will be released in waves of roughly 200,000 every two weeks until all affected employers have been notified.
These letters advise the employer of the number of employee names and SSNs that they reported on 2018 Forms W-2 that did not match SSA's records. SSA includes a prominent warning message:
"IMPORTANT: This letter does not imply that you or your employee intentionally gave the government wrong information about the employee's name or SSN. This letter does not address your employee's work authorization or immigration status.
You should not use this letter to take any adverse action against an employee, such as laying off, suspending, firing, or discriminating against that individual, just because his or her SSN or name does not match our records. Any of those actions could, in fact, violate State or Federal law and subject you to legal consequences."
There are many reasons why names and SSNs on Forms W-2 may not match SSA records, such as data input errors (transpositions, typos), and unreported name changes arising from marriage or divorce.
The letter will advise employers to access Employer Report Status within SSA's Business Services Online (BSO) system to view the names and SSNs that could not be matched to SSA records. There is a one-time registration process, found at: www.socialsecurity.gov/bso/bsowelcome.htm
The letter will ask the employer to review the information on the BSO site and the applicable names and SSNs on the related Forms W-2, and provide any necessary corrections on Forms W-2C within 60 days.
IRS Accuracy Penalties May Apply to Forms W-2
Employers file Forms W-2 to the SSA annually. However, Form W-2 is an IRS tax form, and IRS information reporting penalties1 may apply under Internal Revenue Code (IRC) Sections 6721 and/or 6722 for failure to file and furnish, respectively, correct Information Returns by the required due date. Examples of Information Returns subject to these IRS penalties include Forms 1099, 1095-C and W-2. For Forms W-2, penalties may apply if an employer:
- Fails to file timely
- Fails to include all information required to be shown on Form W-2
- Includes incorrect information on Form W-2 (including employee names and/or SSNs that don't match government databases)
- Files on paper when required to file electronically
Penalties under IRC Section 6721 can be up to $270 per Form W-2, up to an annual maximum of $3,282,5002 for 2018. For businesses with annual gross receipts of less than $5 million, the maximum is $1,094,000. Penalty amounts are indexed and may change annually.
A separate penalty under IRC Section 6722 (failure to furnish correct Information Returns) may also apply to the same error. Both penalties may apply; e.g., if an employer furnished an incorrect form to an employee and also failed to file a correct Form W-2 by the applicable deadline and filing method. If both penalties are assessed, the penalty exposure for employers could be as much as $540 per Form W-2, up to more than $6.5 million annually.
SSA also provides a free Social Security Number Verification Service (SSNVS) through BSO, which allows employers to verify employees' names and SSNs in their records in advance of filing Forms W-2. Using SSNVS can help to significantly reduce errors with W-2 filings.
For more information and a sample letter, see https://www.ssa.gov/employer/notices.html.
You may also call SSA at 800-772-6270, or obtain general information at: www.socialsecurity.gov/employer.
1. Reasonable Cause Regulations and Requirements for Missing and Incorrect Name/TINs, (IRS Publication No. 1586)
2. IRS Revenue Procedure 2017-58
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 March 18, 2019