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Uh-Oh…Received an IRS “no-match” letter?

Has your business received a “no match” letter in the past few months? Many businesses and employers nationwide have received “no-match” letters from the Social Security Administration (SSA). The purpose of these letters is to alert employers if there is a discrepancy between the agency’s files and data reported on W-2 forms, which are given to employees and filed with the IRS. Generally, a no match letter means an employee’s name and Social Security number (SSN) don’t match the government’s records.

According to the SSA, the purpose of the letters is to “advise employers that corrections are needed in order for us to properly post” employees’ earnings to the correct records. This is a very important process in terms of social security benefits. In order to be eligible for social security, you have to have so many credits. The SSA uses an employee’s earnings and work history to determine eligibility. If a person’s earnings are missing, the worker may not qualify for all of the Social Security benefits he or she is entitled to, or the benefit received may be incorrect. The no-match letters began going out in the spring of 2019.

Why discrepancies occur

There are a number of reasons why names and SSNs don’t match. They include typographical errors when inputting numbers. Often times, employers use a third-party payroll processor. Therefore, the employer could have keyed a number incorrectly or the third party processor could have keyed in a number incorrectly upon setup of a new employee.  Name changes due to marriage or divorce are also common mistakes. Name changes must first be recognized with the SSA before the IRS will be able to match the new name with the SSN. There is also the possibility that employees could intentionally give the wrong information to employers, as is sometimes the case with undocumented workers.

Please note, as employers, you are required to get completed Form I-9 for all new employees.  Form I-9 is an employment verification form in which employees have to provide various documents to show proof of identity as well as being eligible to work in the United States.

How to proceed

If you receive a “no-match” letter telling you that an employee’s name and SSN don’t match IRS records, here are some initial steps to correct the information.

Check to see if your information matches the name and SSN on the employee’s Social Security card. If it doesn’t, ask the employee to provide you with the exact information as it is shown on the card.

If the information matches the employee’s card, the employee will be asked to contact the local Social Security office to resolve the issue.

Upon resolution, the employee should inform the employer of the corrections needed to his name/SSN.

Employers should be aware that the IRS can assess harsh penalties associated with incorrect W-2 forms. If you have questions, please contact Wegner CPAs.

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