Truncated Taxpayer Identification Numbers Rules – Final Regulations
The IRS has issued final regulations that amend existing regulations to permit employers to voluntarily truncate employees' social security numbers (SSNs) on Forms W-2, Wage and Tax Statement, that are furnished to employees. The final regulations do not allow truncated numbers on W-2 forms filed with the Social Security Administration (SSA).
In 2014, the IRS issued final regulations authorizing the use of truncated taxpayer identification numbers (TTINs) on certain payee statements and certain other documents. The 2014 regulations were in response to concerns about the risks of identity theft, including its effect on tax administration.
Prior to being amended by the Protecting Americans from Tax Hikes (PATH) Act of 2015, Code Sec. 6051(a)(2) specifically required employers to include their employees' SSNs on copies of Forms W- 2 that are furnished to employees.
The PATH Act amended Code Sec. 6051(a)(2) by striking "his social security account number" from the list of information required on Form W-2 and inserting "an identifying number for the employee" instead. Because an SSN is no longer required by Code Sec. 6051, in 2017, IRS issued proposed regs to permit employers to truncate employees' SSNs to appear in the form of TTINs on copies of Forms W-2 that are furnished to employees.
The IRS has now finalized the regulations, with no change other than a change to the effective date.
The regulations provide that:
- Consistent with the rule in Reg. § 301.6109-4(b)(2)(ii), a payee's SSN may not be truncated to appear in the form of a TTIN on a statement furnished to the employer of the payee who received sick pay from a third party because Code Sec. 6051(f)(1)(A)(i) specifically requires such a statement to contain the employee's SSN. Nonetheless, the regulations permit employers to truncate payees' SSNs to appear in the form of TTINs on copies of Forms W-2 that are furnished under Code Sec. 6051(f)(2) to payees that report such third-party sick pay, in accordance with the general rule governing the reporting of wages to employees on Forms W-2 under Code Sec. 6051(a), because Code Sec. 6051(f)(2) does not specifically require the use of an SSN. (Reg. § 31.6051-3(e)(3))
- An employer is permitted to truncate employees' SSNs to appear in the form of TTINs on copies of Forms W-2 that are furnished to employees under Code Sec. 6052(b) regarding payment of wages in the form of group-term life insurance. (Reg. § 1.6052-2(a))
- Truncation is not allowed on any return, statement, or other document that is required to be filed with or furnished to SSA under the internal revenue laws. (Reg. § 301.6109-4(b)(2)(iii))
- Truncation is allowed if a statute or IRS guidance (e.g., regs, forms, instructions) that specifically requires the use of a SSN, ITIN, ATIN, or EIN also specifically states that the taxpayer identifying number may be truncated. (Reg. § 301.6109-4(b)(2)(ii)) This provides clarification to the rule prohibiting truncation if a statute, reg, other guidance published in the Internal Revenue Bulletin, form, or instructions, specifically requires use of a SSN, ITIN, ATIN, or EIN.
IRS intends to incorporate the revised regulations into forms and instructions.