New IRS rule changes your year-end prep


Your company will soon be able to take a new step to protect employees’ sensitive info at year-end – IRS just issued a final rule that lets employers voluntarily truncate employee Social Security numbers (SSNs) on W-2s.

This isn’t the first change IRS has made to the W-2 process to minimize the risk of sensitive employee personal data falling into the wrong hands. That was the reason behind the pushed up W-2 deadline a few years back.

Here’s what you and your team need to know about this newest change.

Specifics for getting on board

Instead of the full SSN, you can display the last four digits of a taxpayer ID number with Xs or asterisks for the first five digits
(XXX-XX-1234 or ***-**-1234).

Don’t jump on this too quickly though – you won’t be able to start this privacy-protecting practice this
year-end. The rule is effective for W-2s issued after Dec. 31, 2020. So next year-end your company can take advantage.

But be sure Payroll understands: This change applies to employee copies only – the ones you send to the feds must still be full numbers.

When you consider there were 14.4 million victims of identity theft last year, it’s a precaution well worth taking.

Another good reason: Finance pros may soon be expected to take a more active role in fraud prevention.

The Electronic Tax Administration Advisory Committee (ETAAC) wants Payroll staffers to be more involved in the IRS’ Security Summit, a group of stakeholders that share info to help the feds more easily spot identity theft and fraud.

In a recent report ETAAC said that Payroll pros – who handle data that’s attractive to criminals – have unique insight to offer about keeping info safe and secure.

Have Payroll check these 5 areas now

Whether they’re truncated or not, the last thing you want is an error with a Social Security number.

And several problems with SSNs are on the feds’ radar right now – here are five that your team should be watching for this summer and beyond, courtesy of our sister publication, Keep Up to Date on Payroll:

  1. Mismatches on Forms W-2 filed this year have been ID’d. This past spring, the Social Security Administration (SSA) sent thousands of letters to companies with at least one mismatch between a worker’s name and SSN in the Forms W-2 they submitted. Right now, the agency’s getting a new batch of letters ready to send starting in September 2019.
  2. The IRS is pushing for Social Security card name accuracy on the 2020 Form W-4. A new box underneath the field on the new W-4 draft for the worker’s SSN asks if the name on the W-4 matches the name on the Social Security card. If not, the employee can’t ensure credit for their earnings, the form warns.
  3. Workers have been trying to present restricted Social Security cards for work eligibility purposes. Only an unrestricted Social Security card should be accepted as a List C document with Form I-9. Cards stamped with “Valid for work only with DHS authorization,” “Valid for work only with INS authorization” or “Not valid for employment” aren’t acceptable.
  4. Employers not using E-Verify to check worker’s SSNs may have issues with compliance. A recent report from the Office of Inspector General, SSA, found in tax year 2016, approximately 343,000 workers were receiving wages reported under non-work SSNs. Around 80% of their employers were unaware of this because they weren’t registered with E-Verify to confirm eligibility.
  5. Many ITINs are expiring soon. Certain workers who can’t get SSNs use Individual Taxpayer Identification numbers (ITINs) for reporting purposes. Be aware: Any ITIN issued before 2013 with the middle digits 83, 84, 85, 86 or 87 will expire on Dec. 31, 2019.