The IRS has issued a new rule, called SSN masking, that permits businesses to mask, or place an “x” over, the first five digits of an SSN or EIN on tax forms. Last year the IRS permitted businesses to mask SSN and EIN on 1099’s. Now it is permitted for all tax forms including w-2.
The motivation behind it is to reduce the risk of identity theft. Businesses and accounting firms are required to stamp “Official Tax Document Enclosed” on the envelope of tax forms. This is a signal for identity thieves. They know this means a SSN or EIN and other sensitive information is in the envelope. Information they can use to commit various forms of identity theft. One in particular is tax refund fraud.
So what should you do?
If you are a small business owner make sure SSN/EIN are masked before mailing to your employees or subcontractors. Not all electronic tax programs will automatically do this so double check before printing and/or mailing. If your accountant handles this process make sure he is aware of the ruling.
Consequences for not masking
If you do not mask the numbers and the forms are intercepted there is a risk of the recipient becoming a victim of identity theft. Further, the employer that mailed the form may be held liable for damages. Click here for additional information as well as instructions for handling tax forms sent electronically.
If you should receive a 1099 or w-2 with your full unmasked EIN/SSN contact the sender and notify them of the new rule. Even though this was effective July 15 of this year many, including accountants, are unaware of the rule.
Every three seconds another American becomes a victim of identity theft. By working together we may be able to put a dent in the epidemic of identity theft. Make sure you share this with your friends, family and colleagues.