Proposed Regulations Would Allow Truncated SSN on Forms W-2 Furnished to Employees

The IRS recently issued proposed regulations that would allow employers to truncate employees’ social security numbers (SSNs) on copies of Forms W-2 furnished to employees, to help protect employees from identity theft.  The truncated SSNs must appear in the form of IRS truncated taxpayer identification numbers (TTINs): the first five digits of the nine-digit SSN are replaced with Xs or asterisks.  For example, a TTIN replacing an SSN appears in the form XXX‑XX‑1234 or ***‑**‑1234.  Employers may also use TTINs on Forms W-2 furnished to employees for payment of wages in the form of group-term life insurance.  But as with information returns filed with the IRS, employers cannot use TTINs on copies of the Forms W-2 filed with the Social Security Administration.   If finalized, these regulations would be applicable to Forms W-2 required to be furnished after December 31, 2018, due to concerns with providing state tax administrators sufficient time to accommodate TTIN usage on Forms W-2.  Comments on the proposed regulations are due by December 18, 2017.

The proposed regulations reflect statutory changes made in late 2015 by section 409 of the Protecting Americans from Tax Hikes (PATH) Act.  Section 409 of the PATH Act amended Code section 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.  The IRS already permitted the usage of TTINs on a number of information returns furnished to payees including Forms 1095, 1099, 1098, and others.  The use of TTINs is intended to help reduce identity theft by reducing the number of documents that include both an individual’s name and TIN.