No-match letters – IRS alert or Charles Nelson Reilly game show?
November 22nd, 2019
Frances Rayer at Cozen O'Connor
SSA No-Match Letters and Employer Obligations
The Social Security Administration (SSA) has drastically increased its issuance of Employer Correction Request (EDCOR) Notices, or “no-match” letters. No-match letters are sent when the SSA discovers a mismatch between information provided by employers for wage reporting purposes and SSA’s records. SSA sends out no-match letters to advise employers that corrections are needed in order for SSA to properly post employees’ earnings to the correct Social Security record. The no-match letter will tell the employer how many employee names they provided in a particular tax year that do not match their records. Each no-match letter provides information about how to make corrections to wage reports using SSA’s electronic portal — Business Services Online (BSO) — and specifically state that the employer should not take adverse action against the employee as a result of the no-match letter.
Since April 26, 2019, nearly 600,000 employers have received no-match letters and they are especially common in the hospitality, construction, and agricultural industries. Although there are a number of benign reasons why reported names and Social Security Numbers may not agree with SSA’s records, including typographical errors, unreported name changes, and inaccurate or incomplete employer records, the discrepancy can also be the result of employee fraud. Therefore, no-match letters can create complicated compliance issues for employers. As SSA plans to mail more letters to the remaining U.S. employers who reported at least one name and Social Security Number combination in its wage report that did not match, employers should establish a no-match letter policy and take the necessary steps to respond to the SSA’s no-match letters.
Each no-match letter instructs employers to access BSO to find out which employee records do not match and to make corrections in BSO within 60 days. Registering online with BSO here and viewing the Employer Report Status service is the only way employers can view the names and Social Security Numbers that need corrections. Employers can also access the Social Security Number Verification Service (SSNVS) through BSO. SSA advises employers to check the names and Social Security Numbers of employers through SSNVS before filing the annual W-2 submissions. This should alleviate the SSA no-match letters.
SSA also provides a sample letter to employees affected by the no-match letters, instructing them to check the name and Social Security Number reported and, if correct, contact the nearest SSA office to resolve the issue. Consistent with the instructions in the no-match letter, employers should not take adverse employment action against the employee at issue in the no-match letter, such as termination, layoff, or unpaid leave. Adverse employment action could constitute discrimination based on citizenship, national origin, or immigration status. Employers should be careful not to act over zealously in response to a no-match letter.
After checking their own records for clerical error, employers should address the issue directly with the employees in the no-match letter. The employees should be asked to verify their Social Security Numbers within a reasonable time period (30 days max). They should also be informed that discrepancies can occur due to name changes because of marriage, divorce, or other valid reasons an individual may legally change their name. Employers should stay in contact with their affected employees to learn and document the status of their efforts to address and resolve the issue. After the reason for the discrepancy is pinpointed, employers should submit corrections to the SSA using the W-2C filing available through the BSO for each year of employment in the previous three years. Employers should file a W-3c for each tax year a W-2C will be filed. The employee should also amend his or her personal income tax return for each year corrected with the W-2C forms.
Although SSA is not a law enforcement agency, failure to respond to SSA no-match letters could result in penalties from other agencies. SSA processes wage reports as an agent of the Internal Revenue Service (IRS) and shares all forms W-2 information with IRS on a daily basis, including indicator codes when names and Social Security Numbers do not match their records. The IRS has the authority to penalize employers for failure to report correct wage information. Further, an employer’s response, or lack of response, could have adverse consequences in an I-9 audit. U.S. Immigration Customs Enforcement (ICE), Homeland Security Investigations (HSI), and SSA have signed a Memorandum of Understanding in which they agreed to share information on enforcement initiatives. ICE routinely asks companies subjected to I-9 audits whether they have received no-match letters, which can be used to prove that they had “constructive knowledge” of employing undocumented immigrants and raise the potential for criminal charges and hefty fines. It is not recommended that employers ignore no-match letters, because complete failure to respond would be difficult to defend in an audit, particularly if the workers identified by SSA turned out to be unauthorized to work. Employers should assume that SSA will share information with ICE and HSI when there is a significant number of employees with inaccurate information for any one employer; when identity theft might be suspected; or simply as part of the administration’s increased immigration enforcement measures. At the minimum, employers should login to BSO and determine which employee records are identified as not matching and check its own records to verify that accurate information was provided to SSA. If the last wage report matches other employer records regarding name and Social Security Number, employers should contact the affected employees. The employee’s I-9 should also be reviewed — the I-9 and payroll information should contain consistent information, and inconsistency could be the cause of the no-match letter. If the employee admits to working without being authorized, the employer must terminate employment immediately.
In sum, SSA will continue to issue no-match letters to any employer that has provided discrepant employee names and Social Security Numbers. These no-match letters can give rise to significant consequences if not properly investigated, and reasonable investigations must account for anti‑discrimination regulations, federal law, form I-9, ICE investigations, and related compliance matters. Ignoring no-match letters should not be considered as an option.
This blog was written by Frances Rayer at Cozen O'Connor, which authors our Pennsylvania Human Resources Manual, New York Human Resources Manual and Minnesota Human Resources Manual. You can find the original post and their HR Headaches blog (good stuff) on their website