Final Regulations Will Permit Employers to Truncate SSNs on W-2s Provided to Employees Beginning with Forms for 2020
Beginning with the 2020 Forms W-2, employers will be allowed to issue Forms W-2 to employees with truncated social security numbers, though the copies sent to the social security administration will continue to have the employee’s complete social security number on them. The IRS has issued final regulations on the issue, adopting with little change the proposed regulations previously issued on this topic.[1]
Under the revised regulations, described in the following paragraphs, an employer:
May (but does not have to) use truncated SSNs on the employee’s copies of Form W-2;
May not truncate the employer’s own EIN on the Forms W-2 given to employees; and
May not truncate the employee’s SSN on the copy of the W-2 filed with the Social Security Administration.
The preamble provides that the IRS has taken this step to aid in employers’ efforts to protect their employees from identity theft.[2]
The guidance allows the use of truncated taxpayer identification numbers (TTIN) as described in the previously released Reg. §301.6109-4(a):
An IRS truncated taxpayer identification number (TTIN) is an individual's social security number (SSN), IRS individual taxpayer identification number (ITIN), IRS adoption taxpayer identification number (ATIN), or IRS employer identification number (EIN) in which the first five digits of the nine-digit number are replaced with Xs or asterisks. The TTIN takes the same format of the identifying number it replaces, for example XXX-XX-1234 when replacing an SSN, or XX-XXX1234 when replacing an EIN.
Under Reg. §301.6109-4 use of such a number is voluntary and not mandatory, and use of an ITIN will not subject the taxpayer to a penalty for failure to provide a taxpayer identification number (TIN) on a required statement to the recipient.[3] However, a TTIN cannot be used in the following cases:
If use of a TTIN is prohibited by statute, regulation or guidance found in the Internal Revenue Bulletin, IRS forms or instructions for the forms;
Any statement or document if the law, regulations or other guidance (including forms and instructions) require the use of an SSN, ITIN, ATIN or EIN and the guidance does not state that an ITIN may be used;
Any form required to be filed with the IRS or Social Security Administration (such as the IRS copy of Form 1099-INT); and
The taxpayer cannot truncate his/her own TIN on any form he/she provides to another person (such as the EIN for the issuer of a Form 1099R).
The new regulations provide relief for those issuing W-2s to employees, providing “[a]n employer may truncate an employee’s social security number to appear in the form of an IRS truncated taxpayer identification number (TTIN) on copies of Forms W-2 furnished to the employee.”[4] A similar revision is made to Reg. §31.6051-1, Statements for employees and to Reg. §31.6051-3, Statements required in case of sick pay paid by third parties.
However, the employer must continue to provide the full social security number for employees on the Form W-2 sent to the Social Security Administration.[5]
The IRS provides the following example of the proper use of TTINs on Forms W-2:
Example (Reg. §301.6109-4(b)(3)(i)
Pursuant to section 6051(d) and §31.6051-2(a) of this chapter, Employer files the Social Security Administration copy of Employee’s Form W-2, Wage and Tax Statement, with the Social Security Administration. Employer may not truncate any identifying number on the Social Security Administration copy. Pursuant to section 6051(a) and §31.6051-1(a)(1)(i) of this chapter, Employer furnishes copies of Forms W2 to Employee. There are no applicable statutes, regulations, other published guidance, forms, or instructions that prohibit use of a TTIN on Form W-2, and §31.6051-1(a)(1)(i) specifically permits truncating employees’ SSNs. Accordingly, Employer may truncate Employee’s SSN to appear in the form of a TTIN on copies of Forms W-2 furnished to Employee. Employer may not truncate its own EIN on copies of Forms W-2 furnished to Employee.
Generally these rules are effective for forms required to be filed or furnished after December 31, 2020.[6] The delayed effective will allow time for states to revise any requirements they might have to conform with this change—though employers will need to confirm when January 2021 rolls around that the states the employer files in will allow truncated ID numbers on W-2s issued to employees for state income tax purposes.
The additional time will also presumably allow most software vendors to build in support for printing TTINs on employee copies of Forms W-2 and, hopefully, handle printing full social security numbers on the employees’ state copies for any states that have not moved to allow the use of TTINs by January of 2021.
[1] TD 9861, 7/3/19, https://s3.amazonaws.com/public-inspection.federalregister.gov/2019-11500.pdf?utm_source=federalregister.gov&utm_medium=email&utm_campaign=pi+subscription+mailing+list, retrieved July 2, 2019
[2] Ibid, p. 1
[3] Reg. §301.6109-4(b)(1)
[4] Reg. §1.6052-2(a)
[5] Reg. §31.6051-2(a)
[6] TD 9861, 7/3/19, https://s3.amazonaws.com/public-inspection.federalregister.gov/2019-11500.pdf?utm_source=federalregister.gov&utm_medium=email&utm_campaign=pi+subscription+mailing+list, retrieved July 2, 2019, p. 10