IG: IRS ‘Hindered’ Efforts to Stop Illegals from Misusing Social Security Numbers

August 29, 2013 - 3:56 PM

(CNSNews.com) - An audit report published this month by the inspector general for the Social Security Administration says that the Internal Revenue Service's reluctance to penalize employers who consistently file W-2s on which the Social Security Number and name do not match has "hindered" the SSA’s efforts to stop “unauthorized noncitizens” from using Social Security Numbers that are fake or belong to someone else.

The audit report looked at “inaccurate wage reporting”—or the filing of W-2 forms on which the name and the Social Security Number do not match. The SSA has long said these no-match W-2s are frequently filed on behalf of illegal aliens. According to the IG audit report released earlier this month, a senior IRS official admitted to the IG that the service knows this is the case.

“Furthermore,” said the report, “a senior employment tax official at the IRS acknowledged that unauthorized noncitizens accounted for a high percentage of inaccurate wage reporting.”

The audit looked at the U.S. employers who in tax years 2007-2009 (the latest for which all data was available) had the worst records for filing W-2s on which the names and Social Security Numbers did not match

The IG determined the 100 employers who filed the the largest raw numbers of no-match W-2s in those three years and the 100 employers (with at least 100 employees a piece) who filed the most as a percentage of their payrolls.

The audit discovered that the employer with the very worst record for filing no-match W-2s had filed 117,792 over the three years—an average of 39,246 no-match W-2s per year.

The employer with the highest percentage of no-match W-2s had filed them at a 98-percent rate.

The 100 employers who filed the most no-match W-2s and the 100 employers who the highest percentage of no-match W-2s together filed 2,477,546 no-match W-2s over three years. The auditors determined that 20 percent of the Social Security Numbers used on these W-2s were not real Social Security Numbers. In fact, 42,164 of the W-2s had Social Security Numbers that were all zeros. 358 were filed with 666 as the first three digits.

But, the audit determined, no-match W-2s were more likely to be filed using a real Social Security Number that belonged to someone other than the person on whose behalf the W-2 was filed. “SSA had assigned the remaining 2 million (80 percent) SSNs to someone else,” said the report. “About 380,000 of these belonged to young children, and about 258,000 belonged to deceased individuals.”

When the SSA is unable to identify the actual person on whose behalf a no-match W-2 was filed, the credit for the Social Security taxes paid on that W-2 is put into what SSA calls the “Earnings Suspense File” (ESF). In 2007, according to the report, SSA credited 11.0 million W-2s to the ESF, reflecting $90.7 billion in wages paid to people using an inaccuragte, fake or misused Social Security Number. In 2008, 9.5 million W-2s went into the ESF, reflecting $87.5 billion in wages. And, in 2009, 7.8 million W-2s went into the ESF, reflecting $73.4 billion in wages.

The report said that one reason the ESF is growing at such a rapid pace is because of the “intentional misuse” of Social Security Numbers by “unauthorized noncitizens.”

The Treasury Inspector General for Tax Administration has pointed out that the intentional misuse of a Social Security Number is a felony. “The Social Security Act provides that whoever, with the intent to deceive, falsely represents a number to be his or her SSN when, in fact, that number was not assigned to that person, shall be guilty of a felony and subject to a fine,” said TIGTA.

The IG’s audit report said SSA staff believed employers had an incentive to file bad W-2s because they were not worried about the IRS doing anything about it.

“In previous reports, SSA acknowledged unauthorized noncitizens’ intentional misuse of SSNs has been a major contributor to the ESF’s growth,” said the report. “SSA staff told us employers hired unauthorized workers because nothing prevented them from doing so. That is, employers know SSA had no legal authority to levy fines and penalties, and they were not concerned about potential IRS sanctions.”

Some employers admitted to the IG they hired "unauthorized noncitizens" who misused Social Security Numbers.

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