W2s Without Social Security Numbers?

Passed bill seeks to protect employees from Identity theft

According to an email released on 1/25/2016 by Vern Buchanan, United States congressman from Florida 16th district, the President has signed legislation that seeks to safeguard Social Security numbers by allowing employers to keep them from being printed on W2s that are sent to employees. The legislation is noted as H.R. 3568 and is titled the Taxpayer Identity Protection Act of 2015.

In the email message, Representative Buchanan states:

“As tax filing season kicks off this week, I wanted to let you know of an important development. A sweeping measure I introduced to safeguard the Social Security numbers of more than 100 million working Americans is now law. The “Taxpayer Identity Protection Act allows employers to keep Social Security numbers off the most commonly used tax form, the W-2, which is a prime target of identity thieves.”

Upon reading this email several questions immediately came to mind:

  • Since W2s must be distributed this month, how will employers possibly make the systems changes in time for this year’s filing season?
  • Can employees make a request to their employer to not print their SSN info on their W2? If so, how does that happen and is the employer obliged to comply with the employee’s request?
  • Does the W2 copy sent to the IRS (electronically) still use the employee’s SSN if the employer has elected to use an alternate identifier? If not, then how will the IRS match the employees claimed W2 earnings with the earnings reported to the IRS by the employer?

After reviewing the actual language in the bill, it appears that Rep Buchanan may have misstated the actual rule changes that were amended. The legislation states:

The website at Congress.gov states that the H.R. 3568 bill will:

To amend the Internal Revenue Code of 1986 to extend the authority of the Internal Revenue Service to require truncated social security numbers on Form W-2 wage and tax statements.

According to the text of the bill (H.R. 3568)

SEC. 2. Extend Internal Revenue Service authority to require truncated Social Security numbers on Form W–2.

(b) Effective date.—The amendment made by this section shall take effect on the date of the enactment of this Act.

The new bill would replace the current language in Section 6051(a):

(2) the name of the employee (and his social security account number if wages as defined in section 3121(a) have been paid),”

With the new language:

“(a) Wages.—Paragraph (2) of section 6051(a) of the Internal Revenue Code of 1986 is amended by striking “his social security account number” and inserting “an identifying number for the employee”.

Questions to be addressed

Mr. Buchanan’s email states that the bill allows employers to NOT show SSNs on the employees W2 statements.   That is not quite what the text of the bill states. The bill H.R. 3568) states that the IRS will be given authority to require truncated social security numbers on W2s. Judging by the text of the bill, the IRS will now have the authority to command employers to print a truncated SSN or other identifier on the employees W2. Of course this creates other questions for employers such as:

Will all employers be subject to the new W2 identify rule? Or will only certain employers be affected. If so, then how those employers be notified and it how much advanced warning will they have to make the changes?

Printing and distributing accurate W2s is a large undertaking for companies not using a PEO or payroll service bureau. Changing W2 processes will certainly not happen for the 2015 tax year, and it will remain to be seen if, how and when the IRS elects to implement its newfound authority.