As part of efforts to ensure the accuracy of Social Security numbers on wage statements, the Internal Revenue Service should consider revising its rules for waiving the penalties associated with filing statements with inaccurate numbers, the Government Accountability Office said this week.

The IRS has the capability to identify employers who file wage statements with inaccurate SSNs; however, it doesn't have a dedicated compliance program to penalize employers who file wage statements that contain inaccurate Social Security numbers, according to a GAO report released this week.

While the IRS is authorized to penalize employers who fail to file information returns or fail to include complete and correct information on them, under a reasonable cause waiver added under the Tax Reform Act of 1986, any potential penalties can be waived. The GAO report concluded that the bar is set so low with regards to meeting the waiver criteria that few employers would be penalized. The GAO report noted that the IRS has no record of ever penalizing an employer, including employers who were contacted during a review by the agency of "egregious" employers.

To qualify for the reasonable cause waiver, employers must be able to demonstrate that they solicited an SSN from each employee from one to three times, depending on the circumstances, and that they used this information to complete the wage statements. Employers are not responsible for verifying the accuracy of a Social Security number.

In its report, the comptroller general recommended that the IRS consider revising the reasonable cause waiver, and that it consult with other agencies that could be affected prior to issuing any regulations.

The IRS said that it would consider changes, including requiring employers to verify SSNs provided to them by employees, as part of a study it is conducting.

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