It’s Just a Number, Right? Not to the IRS!

As an employer, whether you are a big or small business, you have the responsibility to hire employees who are authorized to work in the United States. One of the ways many employers ensure workers are legally able to work is by getting employees’ social security number. Easy, right? Well, not so much. Let me tell you a story from the offices of The Payroll Department.

Owner of The Payroll Department, Teresa Ray shared this story recently:

Teresa was happy to be serving a new client and was working with the small business owner in getting the payroll records set up for all the payroll services. It’s a pretty painless process. Teresa was reviewing some of the files and came across several “social security numbers” that started with the digit 9.

As some people are aware, the first three digits of a social security number (SSN) are geographically generated, so it may not seem odd for someone to have a SSN that begins with the number 9.

However, the 9 does not indicate a geographic location, it identifies the number as an Individual Taxpayer Identification Number (ITIN), which is NOT a social security number.

According to the IRS,

“ITINs are issued regardless of immigration status because both resident and non-resident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code.

“ITINs are for federal tax reporting only, and are not intended to serve any other purpose. An ITIN does not authorize work in the U.S. or provide eligibility for Social Security benefits or the Earned Income Tax Credit.” (emphasis added)

ITINs are issued for people who are NOT eligible to work. Again, according to the IRS, people get the numbers for identification purposes only.

That means that the ITIN (starting with a digit 9) is not acceptable as one of the forms needed by employers to document that workers can legally be hired in United States workplaces.

When Teresa brought this to the attention of the small business owner, he was surprised because, as is sometimes the case, he was not aware of any difference between a SSN and an ITIN. Teresa explained that the documentation for those particular workers were not acceptable to process and report for payroll.

She also explained that the IRS requires that employers verify that each new employee is legally eligible to work in the United States.

The next day, the client contacted her to tell her he would be “working with a national company” to process his payroll. She was surprised, and alarmed when he added, “they will process my payroll with the numbers that start with 9.”

Although Teresa said she was sorry to lose a client, she would not jeopardize her business, or the client’s small business by accepting the ITIN for those workers. There could be serious repercussions to both, and she tried to explain that to the business owner.

The employer is responsible

Knowing what you must do as a potential employer to fill the jobs in your workplace is paramount to maintaining a good relationship with the Federal government. Straight from the IRS website:

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 (by having prospective employees complete Form I-9, Employment Eligibility Verification)
• Employee’s Social Security Number (SSN)
• Employee’s Withholding (by having new hires complete a Form W-4)

All of these forms must be completed and kept on file for each worker. The Payroll Department works closely with every client to help them remain compliant with the IRS regulations before, during and after hire. Our goal is to know what changes and is needed so that our clients can run their business. We know they rely on us for that.

When you want to be sure you don’t have to worry about your payroll processing, reporting and filing with the IRS, outsource your payroll to The Payroll Department!

-Elaine of the Payroll Department Blog Team