by Heather Larson
Following our recent post for mid-year check-ins on employee withholding, we want to remind employers of the importance of validating employee names and Social Security numbers.
While most employers and employees think of the Social Security number as a new hire piece—that once entered in the payroll system never gets touched again in their employee profile—it’s a number that holds a lot of value for tax reporting and identity. When name changes come up, it’s important that the payroll information that feeds to the year-end reporting form W-2 has the correct name and number match as registered with the Social Security Administration. As an employee who wants to collect Social Security benefits down the road, it should be an attainable measure to make sure the earnings and taxes paid are associated with the right identity.
In light of these concerns, the Social Security Administration is taking measures to close the gap on SSN errors while targeting employers as the first line of defense. On July 23, 2018, the SSA began sending initial notices to third-party providers (payroll providers in most cases) that had mismatches on their 2017 Forms W-2. And beginning July 30th, they began sending initial notices to employers at a rate of 225,000 every two weeks. These notices stand to inform employers that there was a mismatch, but will not identify the number of mismatches.
To see a sample of the letter see the following links:
Please note the Educational Correspondence letter from the SSA is serving as an alert to review employee information and in most cases, no action is required to be taken with the administration in this letter. If errors are found, follow IRS guidelines for correcting prior year W-2’s or contact the SSA directly. If you receive the Employer Correction Request letter, you will need to take action steps to correct with the administration.
Business owners can take action to run checks and balances in this respect. The sample letter gives feasible suggestions to run tests on employee data. The easiest measure is to ask all employees to check their last years form W-2 against their Social Security card for any differences between the two.
The SSA is encouraging employers to take action now before the 2018 W-2 Filing season ramps up because staying ahead of the busy year-end season can prevent mistakes and ensure proper reporting to the agencies. Employers can expect more communication from the Social Security Administration if mismatches continue to be caught and in some cases, penalties can and will be applied.
If you haven’t been to the first link about withholding yet, here is the recent article we ran about your withholdings—make sure they’re just right with free resources from the IRS. Having too much or too little withheld are each undesirable past a certain degree.
If you have any further questions around payroll or year-end reporting you can reach out to your client manager or alternately Heather Larson, CPP at email@example.com; 651-255-9324.
Heather Larson, CPP, Write-Up Accountant works at Redpath and Company in White Bear Lake, MN.More posts by Heather Larson