File W-2c and W-3c forms. Amend employee tax returns. Phone legal council. Investigate tax evasion and identity theft.
These are just some of the steps you must take when employees use fake social security numbers (SNNs).
While none of those actions sound pleasant, the kicker is that they also happen at a very busy time of year: when you’re running year-end payroll.
It’s therefore crucial to verify your employees’ SSNs during the hiring process (or throughout the year) to ensure you’re not adding extra stress and work to your plate.
How Social Security Numbers are Issued
The Social Security Administration (SSA) began assigning the nine-digit SSN in 1936 to track peoples’ earnings over their lifetimes and pay benefits.
The SSN has always comprised of a three-digit area number, a two-digit group number, and ending with a four-digit serial number. Since 1972, the SSA has issued Social Security cards centrally, and the area number reflects the state, determined by the ZIP code in the mailing address of the application.
Because that had limitations (and, let’s be honest, security issues), the SSA changed how it issued numbers in June 2011. The change is referred to as randomization, and its goal is to help protect the integrity of the SSN. This new randomization change affected the assignment process by eliminating the geographical significance and importance of the highest group number.
What an Invalid SSN Looks Like
An invalid SSN is one that the SSA never assigned. A valid SSN will never look like this:
- The first three digits are “000,” “666,” or in the 900 series.
- The second group consists of “00” as the two digits.
- The third group consists of “0000’ as the four digits.
3 Tips to Ensure SSN Accuracy
For some background, businesses must send Copy A of Form W-2 to the SSA. The SSA then matches the employee’s name and SSN against its database. Once matched, the earnings information from the W-2 is recorded with the employee’s earnings history.
If the names and numbers don’t match …well, you can just imagine the headache for the employer and employee. Below are three tips to catch any errors or unauthorized numbers to help ensure a seamless filing process.
1. Verify Names
You’d think verifying names would be simple, but you’d be surprised how many misspellings, nicknames, and unnecessary titles end up on W-2 filings. If you’re manually filling out forms, enter the name on the W-2 as shown precisely on the employee’s Social Security card.
If you want to reduce the HR lift, mandate that employees verify their names and SSNs before you close out your books to prepare W-2s.
Note: If an employee changes their name mid-year, continue to use their old name and have them contact SSA to update their card. Using the new name before the employee updates his or her records may prevent the SSA from posting earnings to the employee’s earnings history.
Employees can verify their own tax information through a self-service portal, which will improve the efficiency of tax preparation and filing.
2. Use Online Resources
There are a few options to verify Social Security numbers for wage reporting purposes.
- The Social Security Number Verification Service is a free online service that allows registered users to verify that the names and SSNs of hired employees match Social Security’s records.
- The Consent-Based Social Security Number Verification Service is available to enrolled private companies and state and local agencies for a fee and provides instant automated verification. It can also handle large volume requests.
- E-Verify is a free online system operated by the Department of Homeland Security in partnership with the SSA. It allows employers to electronically verify that their new hires are authorized to work in the U.S. by comparing details on Form I-9 with Federal government databases. (Unlike the first two, this process validates that your new hire is legally eligible to work in the U.S.)
3. Look to Your Payroll Software
Your payroll software provider may automatically verify employee SSNs – either during onboarding, before filing season, or both. By cross-referencing employee information with official databases, payroll software helps organizations maintain compliance with regulations, reduce errors in payroll processing, and prevent fraudulent activity … all without the employer lifting a finger.
Spot Invalid SSNs to Maintain Compliance
As a final note, it’s crucial to remember that accurate SSNs are important not only for year-end processes but also for maintaining compliance and safeguarding sensitive information within your organization.
Conduct regular audits and thorough documentation practices to reinforce compliance efforts and promptly identify and address any issues related to invalid or fraudulent SSNs. Ultimately, doing so will protect your organization against potential liabilities and uphold the integrity of its data management practices.