Fighting Identity Theft, IRS issues final rules on truncated identification numbers

The IRS issued final regulations that allow the use of truncated taxpayer identification numbers (TTINs) on payee statements and certain other documents wher not prohibited by the Internal Revenue Code, applicable regulations, or other guidance published in the Internal REvenue Bulletin, forms, or instructions.  The regulations finalize the propised rules issued in 2013 with a few significant changes and make permanent a pilot program uner Notice 2011-38 that is obsolote now that the final regulations have been published.

A TTIN is an individual's Social Security nmber, individual taxpayer identification number that is truncated by replacing the first five digits of the nine digit number with X's or asterisks.  In a change from the proposed rules, it also includes employer identification number.  The use of a TTIN is allowed on electronic payee statements as well as paper payee statements.

While filers are permitted to truncate numbers on payee statements, it does not permit them to truncate numbers on forms filed with the IRS.  It also does not allow the use of a TTIN on Form W-2 because Sec. 6501(a)(2) requires that form, when furnised to employees, is required to show the name of the employee and his Social Security account number.

Under the rules, a person cannot truncate its own taxpayer identification number on any tax form, statement, or other document that person furnishes to another person.  This means also that an employer cannot use a TTIN in place of its EIN on a Form W-2 that the employer furnises to an employee.

The final regulations also clarify that using a TTIN as permitted in the regulations will not result in any penalty for failure to include a taxpayer identifying number on any payee statement or other document.

The amendments to the specific information reporting regulations are generally effective for payee statements due after December 31, 2014.  Taxpayers were allowed to rely on the rules in the propesed regulations prior to the publication of the final regulations.

 

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