Tax & Accounting Blog

The Social Security Administration is Getting Serious About Your Bad Data

1099, Blog, ONESOURCE August 10, 2018

The Social Security Administration (SSA) recently announced that they will begin something that they have been threatening about for years. The SSA obviously wants and needs accurate data like properly spelled names and correct Social Security Numbers (SSN). So, they have announced that they will begin mailing Employer Correction Request Notices (EDCOR) (I’m just not sure what that “D” stands for).

The letters will start being mailed in the spring of 2019 and will be sent to businesses and third parties that have at least one incorrect Form W-2 and request that they file a Form W-2C within 60 days. That would coincide with the January filings of course. While you might think that you are good because your data passes TIN matching, I might have some unsettling news for you. When you TIN match your Form W-2 data, most likely you are validating that through the IRS eServices and the IRS only looks at the first four characters of the last name and does not even look at the first name. When you file your W-2 forms, they are filed directly to the SSA and they actually look at the first and last name. They look at the first 10 characters of the first name and first 13 of the last name. This is much different from how the IRS does it and the difference may actually yield errors.

The part that is most concerning to me is that the SSA requests that you submit corrections on the Form W-2C within 60 days of receipt of the letter. My question is “Or what?”. There is no noted penalty and the SSA is really not clear on what actions they may or may not take. If you look at their FAQs, there is a question there asking if the IRS will penalize for bad data. The answer is “The IRS is responsible for any penalties associated with Form W-2. See Reasonable Cause Regulations and Requirements for Missing and Incorrect Name/TINs, (IRS Publication No. 1586) for more information.” Is that an answer?

Now here is the most interesting part for me. We all know that the IRS will send paper or DVD CP-2100 Notices for 1099 errors but the SSA will just send you a letter. The letter will advise the employer or third party that there were errors and instead of providing the errors in the letter, they request that you go online to the Employer Report Status within Business Services Online (BSO). If you are not registered, it will require you to do so. You can register at www.socialsecurity.gov/bso/bsowelcome.htm. Once you register, you will be able to view the records that could not be matched. Additionally, the site will allow you to verify employee names and SSAs in the SSA system.

To find more information on this, please visit the SSA site: www.ssa.gov/employer/notices.html