The IRS just made it a little harder for payroll departments to report tax information.
The IRS announced on its website that employers will now have to manually enter the Taxpayer Identification Number (TIN) on employees’ W-2 forms if they have Individual Taxpayer Identification Numbers (ITINs). This requirement will become part of the 2011 tax year.
No software can be used to populate TINs on W-2s, despite any override features. If employers don’t comply with this new rule, they could receive a written reprimand, a suspension, or, in the worst case, become ineligible to e-file. The IRS cited Rev. Proc. 2007-40, which gives them the right to take this action.
This was put in place in order to put a stop to taxpayer and preparer fraud. In earlier years, the IRS had used ITINs to weed out fraudsters.
An ITIN is a 9-digit number and has a range of 70-88 in the 4th and 5th digits. On April 12th of this year, that range was extended to 90-92 and 94-99 in the 4th and 5th digits. The IRS gives ITINs to taxpayers who must have a TIN but don’t have, and cannot get, a Social Security number.
This new regulation by the IRS would slow down the W-2 process. The IRS realises this will be a pain for payroll workers, but they have are doing this to help put a stop to tax fraud. They suggest that payroll departments work with their IT departments to update their software. The penalties for having non-manual TINs will be enormous.
