Posts Tagged ‘Social.Security.Administration’

IRS Is Big Hindrance in Social Security’s Matching of Social Security Numbers and Names

Sunday, September 1st, 2013

I am on the distribution list for TIGTA (the Treasury Inspector General for Tax Administration) audit reports. These reports (which generally review IRS operations) are quite useful. I don’t read all of the other federal agencies’ Inspector General reports. There are so many government agencies, each with their own Inspector General, that it would be impossible for me to do so.

The Social Security Administration (SSA) has an Inspector General. In a report issued on August 9th, the Social Security Inspector General looked at “Employers Who Report Wages with Significant Errors in the Employee Name and Social Security Number.” The stated goal of the report is

Our objectives were to identify patterns of errors and irregularities in wage reporting for (1) 100 employers who had the most suspended wage items and (2) 100 employers who had the highest percentage of suspended wage items for Tax Years 2007 through 2009.

Before I venture to the IRS’s role in this, I do need to note that SSA recognizes that misuse of social security numbers is a big issue. The Inspector General noted that most employers do not use the SSA’s Employee Verification Service nor do they use E-Verify. Many of the misuse errors stem from what the report call “noncitizen workforce.” I’ll call them by the more popular name (as in popular culture), illegal aliens.

So where does the IRS fit in to his? In several places. First, the Inspector General would like to see the IRS mandate use of verifications; the Inspector General doesn’t believe the situation will improve until that’s done.

Second, the IRS has the ability to levy fines and penalties against employers who submit inaccurate wage reports (e.g. Form 941s). From the report:

In previous reports, we noted that SSA relied on the IRS to enforce penalties for inaccurate wage reporting because SSA had no legal authority to levy fines and penalties against employers who submitted inaccurate wage reports. SSA senior staff did not believe employers had an incentive to submit accurate annual wage reports because the IRS rarely enforced existing penalties. SSA staff believed applying penalties would deter SSN misuse. Furthermore, SSA senior staff believed the Agency could provide the IRS with sufficient evidence to show an employer knew or should have known its employees’ SSNs were incorrect. For example, a reasonable person should recognize that hundreds of workers could not have the same or consecutively numbered SSNs.

Well, what does the IRS have to say about that?

A senior IRS employment tax official we contacted during this review acknowledged that the IRS has enforcement powers and can impose fines/penalties on employers who submit inaccurate wage reports. In fact, he noted that the penalty for employers who submit incorrect names and SSNs recently increased from $50 to $100 for each incorrect wage item. Although the IRS periodically conducts compliance audits, which may identify wage reporting issues, it could not provide data on the number of employers it had penalized because of inaccurate wage reporting. Furthermore, the tax official told us the IRS needs stronger standards (additional legislation) to deter employers who submit inaccurate wage reports. In addition, several ESLOs [Employer Service Liaison Officers] told us they were not aware of any fines/penalties the IRS had levied against employers who consistently submit erroneous name and/or SSN information.

Given the possible misuse of social security numbers could also be an issue with identity theft, one would think the IRS would be all over this issue. That’s especially the case given the IRS’s recent press releases noting the agency’s strong policies against identity theft. In this case, one would be wrong.

We acknowledge SSA’s efforts in working with the IRS to improve employer wage reporting. Unless the IRS takes additional steps to hold employers who consistently submit erroneous or incorrect wage reports accountable for their actions through an effective employer penalty program, we do not believe employer wage reporting will significantly improve.

There isn’t much to add to this. While the SSA Inspector General’s report was aimed at the Social Security Administration, it appears to this observer that the real target should have been the IRS. But perhaps the IRS has been too busy with other items (such as tax preparer regulation) to look into this issue.

A Story of Identity Theft; Why Is the Death Master File Still Available?

Sunday, August 26th, 2012

My father died almost six years ago. It’s something that’s inevitable for all of us. My mother was lucky in one respect: No one stole my father’s identity at death. Unfortunately, such identity thefts are becoming far more common.

Jason Dinesen, an Enrolled Agent in Iowa, ran a seven-part story in his blog relating the identity theft of a young widow’s late husband. He has four conclusions (all of which are valid imho). I’m going to focus on the last one:

Congress needs to do something to fix the problem with the Death Master File. It’s ridiculous that the government publishes something that is such a goldmine for identity theft.

I’ll add another story of identity theft. My partner’s stepfather passed away last January. When we filed his 2010 tax return we discovered that he was a victim of identity theft. Someone from Tampa, Florida (hundreds of miles away from where the stepfather lived) filed a tax return using his name and social security number. We both asked ourselves how in the world did a Tampa resident get the name and social security number? There were absolutely no connections between the stepfather and Florida. We both thought that the most likely means was the Death Master File.

So you’re asking, what is the Death Master File? Well, you can find it on the Internet.
While a single search costs about $10, you can search 1 million names for $12,000. If I’m a crook and I want to do some identity theft, I don’t need that many names. I could just do 5,000 for only $1,500. If each of my 5,000 phony tax returns nets me $1,500, I’ll have a very nice rate of return.

Mind you, I can see that there are legitimate purposes for the Death Master File. When I initially became an IRS e-service provider I went through a background check. At a minimum, such checks should be required for subscribers to the Death Master File.

Identity theft is a growing crime. To have the government assisting in the crime is horrible. Yet that’s exactly what’s happening today.