The IRS is getting tough on W-2s
The W-4 will protect you
By Henry W. D. Parker
As some of you readers know, Safety and
Environmental Compliance Consultants is a firm that acts as an
advocate to the employer in assisting the employer in dealing
with employees. Most of our work is OSHA- and EPA-related, but
we keep up to date with issues that cover labor and this bit of
news may come to as a surprise.
The issue
In 2001, the Social Security
Administration sent 109,157 resubmission letters (meaning the
file had mistakes). At the end of July, 2002, that number had
shot up to 806,000. Soon the SSA will send you an infraction
letter with a phone number and you will be fined if you do not
call them.
This coming year your government wants to
keep track of your labor force.
It seems that the government often sends
out letters but get no response, one reason being that the
letter says you are not to disturb or otherwise harass your
workers to prove they are who they say they are and that their
numbers match.
As of January 2002, you must be able to
prove that your workers are indeed your workers. What I mean
here is that if you have workers who are not who they say they
are, you will be fined $50 per case.
The reason this is happening is that the
Immigration and Naturalization Service and the Internal Revenue
Service are now talking due to the September 11 activities of
persons with the wrong credentials, as far as the INS, IRS and
the Social Security Administration are concerned.
What kinds of persons are giving you false
numbers?
This is not just about people that cross
our borders but also those who are hiding a past identity by
coming up with fake documents — persons such as
ex-husbands and wives, child support cheats, felons who have a
bad history, persons that IRS is looking to find because of tax
evasion, persons with active warrants from other states and
countries and any number of other reasons.
How it affects you
So how does this affect your business? You
will have to prove that you have done your due diligence
regarding records that pertain to your employees. If you pay
wages by check and deduct taxes from those checks, the
information you report will be scrutinized for correctness. In
this, you are the responsible party because it is your business
that is reporting the income
Where to go for help
This may not be a good idea, because they
will come to you if there are discrepancies, but if you want to
know if your employees are giving you the correct information
you can call the SSA. If you do call them, you will have to
tell them who you are, the name of the employee, date of birth,
Social Security number and gender. They will then check and let
you know if there are discrepancies. The SSA number is (800)
772-6270.
There are other ways to find out the
information, but you most likely know already if you have
illegal employees and may have decided to ignore it.
Compliance plans by IRS
IRS wants full compliance, and this means
that very few errors will be allowed for small employers.
Penalties will be levied on employers who don’t cooperate
or give misleading information.
IRS plans to mail employers a proposed
penalty letter listing the incorrect name and number
combinations. This letter will contain a contact number to
call. ALL employers who don’t get in touch with the IRS
immediately will receive a penalty — not just the worst
offenders.
This compliance with IRS is important to
many different agencies and they could all be working together
soon under the Office of Homeland Security. The U.S. government
has been somewhat embarrassed since the 9/11 tragedy with
incidents like the INS issuing visas to the dead terrorists.
They do not want to be in this position again.
What to do
Have every employee fill out new W-4 forms
once yearly. In doing this, you will have the name and social
security number of the employee filled in their own writing.
(That way it is their fault if the data is wrong.) Remind
employees that you’ll have to start withholding at a
single zero if you don’t get an updated form.
Your employees may not want to do this and
decide to leave you instead. This is probably all right because
if they do leave, you will not be getting a letter from the IRS
that says the numbers don’t match. Also, it is easier to
deal with losing employees when you know they are going to
leave rather than have the immigration officers take them out
in those plastic straps that are currently used in place of
handcuffs.
Comply in advance by having a copy of the
proper paperwork on hand if inspectors ever come to you looking
for a missing social security contributor. You cannot ignore
the requests of the IRS and expect to be left alone on these
issues. They are forcing the employee to either get legal or
face unemployment without benefit.
(The above information was presented at
the National Payroll Reporting Conference. Look for further
information in the Federal Register.)
Henry W, D, Parker's firm, Safety &
Environmental Compliance Consultants, Inc., works on client
compliance issues relative to OSHA, EPA and workers’
compensation. Contact him at hwdp@aol.com or on the web at www.complyhere.com.
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