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Red Tape Blues: SSA Comes, IRS Goes

Wednesday, April 27, 2011

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Uncle Sam has good news and bad news for employers already awash in paperwork: More is on the way, but some will stay away.

On one hand, “No Match” letters from the Social Security Administration are returning to employer mailboxes, as the agency revives its old notifications of mismatches in employee Social Security Numbers. On the other hand, a much-dreaded expansion of Internal Revenue Service reporting requirements has been axed.

1099 Repeal

The good news, for many employers: President Obama has repealed expansion of the IRS Form 1099 reporting requirements.

Under the plan, subcontractors and other businesses would have had to file 1099 forms beginning in tax year 2012 documenting each payment of $600 or more per year to a vendor.

The American Subcontractors Association led the charge against the proposal, calling it a paperwork nightmare for subs. An ASA survey in September found that many construction subcontractors who were used to filing 25 or fewer 1099s per year would be filing 200 or more under the new plan.

Association members sent thousands of e-mails and visited federal legislators’ offices, urging repeal.

 Social Security Administration
The Social Security Administration wants you to “boldly go” to its site and follow up on mismatched employee Social Security Numbers.


Legislators got the message. On March 3, the House approved the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act, repealing the plan; the Senate followed suit on April 5. Obama signed the measure on April 14.

“Congress and the president heard the concerns of ASA members across the country and made the right decision: to eliminate the new 1099 reporting burdens before they started really hurting subcontractors,” said 2010-11 ASA President Timmy McLaughlin.

‘No Match’ Letters Return

Meanwhile, after a three-year hiatus, the Social Security Administration has quietly resumed sending letters to employers, notifying them if the Social Security Numbers they report do not match the employees’ names.

The mismatch could involve a typographical error, unreported name change, inaccurate or incomplete employer record, or misuse of an SSN. Whatever the reason, the SSA places the information in its Earnings Suspense File (ESF) instead of posting the earnings to a worker’s record.

SSA began sending the letters (officially known as decentralized correspondence, or DÉCOR, notices) to employers, employees and self-employed workers in 1979.

‘Wolf in Sheep’s Clothing’

Although the so-called “No Match” letters noted that a mismatch by itself indicated no wrongdoing by the employer or employee, immigrant labor advocates say the letters became an excuse for some employers to lay off workers with seniority or fire them without cause. One immigrant’ rights blogger called the letters “a wolf in sheep’s clothing.”

The agency halted the employer letters for tax years 2007 through 2009 because of litigation surrounding a proposed Department of Homeland Security (DHS) regulation involving a related correspondence process. DHS later rescinded its plan, and SSA resumed sending the employer letters April 6, without a public announcement.

The new version of the letter omits an old Immigration and Customs Enforcement insert warning that failure to act on the letter could be construed as evidence that the employer “knowingly” employed “unauthorized workers”—action that carries criminal and civil sanctions, ICE noted. Also, the new version lists only one employee per letter, instead of multiple numbers and names in one notice.

More information for both employees and employers is available on the SSA site.

   

Tagged categories: Labor; Subcontractors

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