The IRS has issued proposed regulations that would allow employers to truncate social security numbers (SSNs) on the employee copies of Forms W-2 in REG-105004-16. However, the IRS has announced that the option won’t be available for W-2s issued before December 31, 2018.
Prior to a change in the law found in the PATH Act, IRC §6051(a)(2) required the employee’s social security to be printed in full on the employee’s copy of Form W-2. Due to concerns regarding identity theft, Congress changed the law to remove that requirement. However, the law did not mandate the use of truncated numbers and the regulations continue to require use of the employee’s entire social security number.
The revised regulation would allow the use of “truncated taxpayer identification numbers” (TTIN) on Forms W-2 issued to employees. Reg. §301.6109-4(b) provides the definition of such numbers which currently are authorized to be used on other information reporting forms. As the preamble describes a TTIN:
Under §301.6109-4(a), a TTIN is an individual’s 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. For example, a TTIN replacing an SSN appears in the form XXX–XX–1234 or ***–**–1234. Section 301.6109-4(b)(2)(ii) prohibits using TTINs if, among other things, a statute, regulation, other guidance published in the Internal Revenue Bulletin, form, or instructions specifically requires the use of an SSN. Additionally, §301.6109-4(b)(2)(iii) prohibits the use of TTINs on any return, statement, or other document that is required to be filed with or furnished to the IRS.
The regulations would still require full SSNs on the copy filed with the Social Security Administration.
The regulation makes certain changes that remove obsolete provisions and cross-references from the regulations.
But, as was noted earlier, 2017 W-2s will not be covered by this rule. The IRS explains the reason for this delay by noting:
Several state tax administrators have requested additional time to develop systems to process the copies of Forms W-2 filed with state income tax returns that may contain truncated SSNs. In light of this request, these proposed regulations will not apply to Forms W-2 required to be furnished before January 1, 2019. Accordingly, these proposed regulations provide that these regulations, as amended, will be applicable for statements required to be filed and furnished under sections 6051 and 6052 after December 31, 2018.