Tax & Accounting Blog

IRS Reauthorizes Truncation of SSNs and ITINs for 2011 and 2012

ONESOURCE, Tax Information Reporting, Trust Tax May 23, 2011

IRS Notice 2011-38 extends a pilot program giving Form 1099 filers the option of substituting an * or an X for the first five numbers of a social security number (SSN) or individual taxpayer identification number (ITIN) on paper statements sent to payees.  Truncating tax ID numbers in this way, for privacy and to discourage identity theft, was permitted as a pilot project for tax year 2009 and 2010 reporting only.  The IRS published Form 1099 instructions for 2011 saying that truncation was no longer permitted.  But those instructions have now been overridden by the extension of the pilot program to cover tax year 2011 and 2012 reporting.
Truncation is permitted on Forms 1099, Form 5498, and all of the Forms 1098 except the 1098-C.  Two methods are permitted.  (1) Each of the first five numbers can be replaced with an asterisks; or (2) each of the first five numbers can be replaced with the letter X.  For example, 123-45-6789 would be printed as ***-**-6789 or XXX-XX-6789.
There are some limitations, though.  Truncation is permitted only on paper payee statements, not on electronic statements.  It is permitted only for social security numbers (SSNs), individual taxpayer identification numbers (ITINs) and adoption taxpayer identification numbers (ATINs).  No truncation is permitted for employer identification numbers (EINs, the tax ID numbers which are formatted XX-XXXXXX).  And, complete tax ID numbers must be printed on all forms filed with the IRS.