The Internal Revenue Service plans to test a pilot program that would permit filers of information returns to truncate an individual payee’s nine-digit identifying number on paper payee statements for calendar years 2009 and 2010 to protect against identity theft.

The new pilot program, described in Notice 2009-93, only applies to paper payee statements in the Form 1098 series, Form 1099 series and Form 5498 series. Generally, filers are required to furnish payee statements to payees on or before Jan. 31 (in some instances on or before Feb. 15) of the year following the calendar year for which the information return is made, or be subject to penalties for failure to file the correct information returns or furnish the correct payee statements.

Regulations, forms and form instructions typically require that the payee statement include the identifying number of the payee. The three types of identifying numbers applicable to individuals are Social Security numbers, individual taxpayer identification numbers, and IRS adoption taxpayer identification numbers. All three of these identifying numbers are nine-digit numbers in the form 000-00-0000.

A person’s identifying number is sensitive personal information, the IRS noted. A risk exists that this information could be misappropriated from a payee statement and misused in various ways, such as to facilitate identity theft. In an effort to minimize this risk, the IRS is creating a pilot program allowing truncation of individual identifying numbers on certain paper payee statements.

The IRS is inviting the public to submit comments on the proposed pilot program by May 1, 2010.