IRS to Allow Truncated Social Security Numbers

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By Howard Perlman

The Internal Revenue Service is to start a regulatory process that would allow but not require truncated Social Security numbers on Forms W-2, Wage and Tax Statement, an agency representative said Jan. 7 during a monthly payroll industry teleconference.

Congress allowed truncated Social Security numbers to be used on Forms W-2 in Section 409 of Division Q of the Consolidated Appropriations Act of 2016 (Pub. L. 114-113), signed Dec. 18 by President Barack Obama. The truncated numbers are not to be allowed for 2015 Forms W-2 filed in 2016 because the relevant regulations need to be updated.

The regulations (TD 9675) that allow truncated taxpayer identification numbers to be used on Forms 1099-MISC may be updated to include authorization for truncated identification numbers on Forms W-2, said Nancy Rose, senior counsel in the IRS's Office of Chief Counsel.

Issues that states might have regarding individual tax returns filed without automatic access to full Social Security numbers on Forms W-2 are to be examined as part of the regulatory process, Rose said.

Among other issues discussed during the teleconference:

•The IRS clarified a deadline associated with the extended deadlines granted by Notice 2016-4 for filing Affordable Care Act information returns for 2015 in 2016. The notice delayed the filing deadlines for when Forms 1094-B, 1095-B, 1094-C and 1095-C are to be filed but did not identify that the general fixed date, Aug. 1, for determining applicability of certain late-filing penalties under Internal Revenue Code Sections 6721 and 6722 would be similarly changed in relation to the ACA forms.

The date for determining whether the late-filing penalty of $100 per form or $260 per form would apply for 2015 ACA forms filed in 2016 is to be 90 days after Aug. 1, which would be Oct. 30, an IRS representative said during the teleconference.

•The IRS, which is responsible for collecting returns that reconcile third-party sick-pay taxation data, is concerned by a decline in the number of reconciliation forms submitted, said Judy Davis, senior IRS tax analyst. The agency gained responsibility in 2015 for the process from the Social Security Administration.

The IRS received fewer Forms 8922, Third-Party Sick Pay Recap, first used in 2015, than the average annual number of third-party sick pay recap Forms W-2 that the SSA received in recent years, Davis said.

By Howard Perlman