Federal law requires employers to obtain Social Security numbers from all new hires. Social Security numbers are used to report wages and withholding. It is also the employer's responsibility to verify Social Security numbers at the time of hire. So what happens if a new hire's number cannot be verified? What if the number is incorrect?
To begin with, employers check the veracity of Social Security numbers by logging on to the Social Security Administration (SSA) website and using the free tool provided there. Within seconds, a new hire's Social Security number can be run. Nothing more needs to be done if the tool returns accurate results. If not, employers have certain obligations.
1. Check Employer Records
The first thing an employer does is check its own records. Perhaps the number was entered into the Social Security tool incorrectly. Typographical errors are more common than you might believe. If the number appears to be accurate, entering it one more time might do the trick. If not, it is on to the next step.
2. Ask for Employee Verification
The next step is to contact the employee and request that he or she verify the Social Security number provided. Sometimes going from memory doesn't work out well. Employees can check their Social Security cards, comparing the number against what they wrote in their paperwork. An employee who does not have a Social Security card should pay a visit to his or her local SSA office to rectify the situation. That could be the key to straightening out the problem.
3. Send the Employee to the SSA Office
If the employee verifies that the provided number is accurate, the next step is to send him or her down to the local SSA office. It will be up to the employee to get things straightened out one way or the other. Employers are required to obtain and report Social Security numbers; they are not obligated to fix problems between employees and the SSA.
4. Document the Process
Employers are required to do everything within reason to verify employee Social Security numbers. They should also document all their efforts. The document should be stored for a minimum of three years just in case an audit is triggered at some point in the future. These documents should be stored even after the issue with the incorrect number is sorted out.
5. Do Not Terminate the Employee
Under no circumstances should an employer terminate an employee based solely on an incorrect Social Security number. As long as all the other information on the employee's I-9 form checks out, the employee is eligible to work as a U.S. citizen or legal resident. Terminating based solely on an incorrect Social Security number could get an employer in trouble.
As long as the employer has documented its efforts to obtain the proper Social Security number, it will not be held liable as a result of a future audit. Furthermore, the employer must still use the Social Security number provided. The employee's income must still be reported, tax withholding must take place, and annual W-2s must be issued.
Incorrect Social Security numbers are actually pretty common. We see it all the time. More often than not, the problem can be traced back to a new hire's poor memory or a transcription error. At any rate, employers are safe as long as they adhere to what is required by them of federal law. Make an attempt to verify Social Security numbers, document everything, and continue to withhold and pay taxes on time. That is all the government requires.