Federal Requirements for Verifying Social Security Numbers (SSN)

As the roll-out of the Hawaii Information Portal (HIP) begins, HR professionals throughout the State of Hawaii must understand the federal requirements for verifying Social Security Numbers (SSN), to ensure compliance with IRS regulations. Not providing the correct employee name and SSN on a Form W-2 is considered “reasonable cause” and is subject to IRS penalties.

Per IRS Pub. 1586, Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs:

An employer must make an initial solicitation for the employee’s SSN at the time the employee begins work. The initial solicitation of the employee’s SSN may be made in person, by oral request, or by written request. The SSN may also be requested through other communications, by mail, telephone, or other electronic means. The employer may rely in good faith on the number provided by the employee and use it when filling out the employee’s Form W-2. Employees are required to complete Form I-9, Employment Eligibility Verification, to establish that they are legally eligible to work in the U.S.

An employer has an obligation to ask for Form W-4 from a new employee. Under IRC3402(f)(2)(A), on commencement of employment, an employee must provide a signed Form W-4 (or a substitute form) on commencement of employment, stating the number of withholding exemptions claimed by the employee.

Since the employee is required to furnish Form W-4 to the employer on commencement of employment, Form W-4 may be used for the initial solicitation of the employee’s SSN. An employer who retains the Form W-4 in its records will be able to document that an initial solicitation of a TIN was made, verifying that it acted in a responsible manner.

Also per the IRS:

If you hire employees there is information that you need to secure for your records and forms that you must complete.

    Eligibility to Work in the United States

    You must verify that each new employee is legally eligible to work in the United States. Have the employees you hire fill out Form I-9, Employment Eligibility Verification (PDF).

    Employee’s Social Security Number (SSN)

    You are required to get each employee’s name and Social Security Number (SSN) and to enter them on Form W-2. (This requirement also applies to resident and nonresident alien employees.) You should ask your employee to show you his or her social security card. The employee may show the card if it is available. You may, but are not required to, photocopy the social security card if the employee provides it. Record each new employee’s name and social security number from his or her social security card. Any employee without a social security card should apply for one using Form SS-5, Application for Social Security Card (PDF). The Social Security Administration (SSA) offers social security number (SSN) verification and quick access to relevant forms and publications.

    Do not accept an ITIN in place of an SSN for employee identification or for work. An ITIN is only available to resident and nonresident aliens who are not eligible for U.S. employment and need identification for other tax purposes. You can identify an ITIN because it is a 9-digit number, beginning with the number “9” and is formatted like an SSN (NNN-NN-NNN).

    Note: An individual with an ITIN who later becomes eligible to work in the United States must obtain an SSN.

    Employee’s Withholding

    To know how much income tax to withhold from employees’ wages, you should have a Form W-4, Employee’s Withholding Allowance Certificate, on file for each employee. Ask all new employees to give you a signed Form W-4 when they start work. Make the form effective with the first wage payment. If employees claim exemption from income tax withholding, they must indicate this on their W-4. The amount of income tax withholding must be based on filing status and withholding allowances as indicated on the form. If a new employee does not give you a completed Form W-4, withhold tax as if he or she is single, with no withholding allowances. Additional withholding may be required on wages paid to non-resident aliens.

    A Form W-4 remains in effect until the employee gives you a new one. If employees claim exemption from income tax withholding, they must give you a new Form W-4 each year. If an employee gives you a Form W-4 that replaces an existing Form W-4, begin withholding no later than the start of the first payroll period ending on, or after the 30th day, from the date you received the replacement Form W-4. For exceptions and invalid Forms W-4, refer to Publication 15 Circular E, Employer’s Tax Guide.

    You may also refer your employees to the withholding allowance calculator. Remember that this application is to help employees to ensure that they do not have too much or too little income tax withheld from their pay. It is not a replacement for Form W-4, but most people will find it more accurate and easier to use than the worksheets that accompany Form W-4. They may use the results of this program to help them complete a new Form W-4, which they will submit to their employer. Special rules may apply to agricultural employers. For more information, please refer to Publication 51 Circular A, Agricultural Employer’s Tax Guide.