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I am interested in others' interpretations of the IRS regulations and guidance on potential penalties for incorrect SSNs on Form 1095-C.

Specifically, if an employer receives a TIN Validation Error when filing a 1095-C electronically, indicating there is a mismatch between an employee's SSN and Name in the IRS database (either a mismatch or no record), is the employer required to verify the SSN with the employee and make an attempt to correct the return, in order to demonstrate a good faith effort to comply (and thus avoid a penalty for failure to file a correct return)? Or is documentation of the initial receipt of the incorrect SSN from the employee enough to demonstrate good faith effort (i.e. a Form W-4)?

Does the 2015 relief from penalties for filing incomplete or inaccurate information based on a "good faith effort" to comply mean that the regulations under 26 CFR 301.6724-1 pertaining to a waiver of penalties due to reasonable cause don't apply for 2015?

Should an employer receiving a mismatch error notice thru the efile system verify the SSN with employee now, or wait until a formal penalty notice is received?

I'm setting aside the myriad of immigration and discrimination issues this presents for purposes of this discussion.

Any input or discussion would be greatly appreciated!!

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Agreed. If you have the wrong SSN on file, then now would be a better time than later to correct the FICA and income tax withholding payments that have gone to the wrong SSN.

If the SSN is not the employee's, then other steps may be in order, perhaps through e-verify.

In any case, I wouldn't sit around waiting for additional IRS notices.

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  • 2 weeks later...

Interesting question which I addressed in this article. http://www.healthcare-attorneys.com/dont-accept-accepted-with-errors-how-to-handle-incorrect-tins/

I also touch on the issue in this article http://www.healthcare-attorneys.com/corrected-returns-when-an-employer-needs-to-file-a-corrected-form-1095-c/

I agree it is not entirely clear what the responsibilities are for an employer who receives an accepted with errors response for an incorrect TIN.

Ryan

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I agree that in many situations correcting sooner rather than later makes sense, but there could be situations where a business reason might exist to be more deliberate in the timing (i.e. what if significant percent of workforce has SSN errors and there could be immigration issues?).

I'm trying to figure out what the options are for an employer under the regulations.

Ryan - helpful article, thanks!

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There are fines and penalties for hiring or continuing to employ persons who are not authorized to work in the USA, for failing to comply with I-9 regulations, etc. Similarly, there are fines and penalties for discriminating against someone who is authorized in the USA.

https://www.uscis.gov/i-9-central/penalties

So, usually the best option for the employer is not to dilly dally in resolving the status of the employees who have an SSN mismatch.

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One of the baffling things regarding the incorrect TIN error issue is an employer (or software provider submitting on behalf of the employer) has no way of determining which dependent is triggering the incorrect TIN error. For example, if an employer has a self-insured plan the employer would submit the employee's TIN on line 2 and then each covered dependents TIN would be entered in column (b) on part III. Part III could have numerous TINs depending on the number of covered individuals. For the purposes of this example let's suppose this employee has a spouse and three dependent children covered by the plan. In that case there would be a total of five TINs. However, if the employer receives a TIN error related to the Form 1095-C for that employee, the IRS error notice does not notify the employer which TIN (or TINs) is causing the error notice. Therefore, the employer would have to solicit the TINs for all five TINs to fulfill its solicitation obligations under section 6724. Considering the IRS is comparing each TIN submitted to check for accuracy (it has to be to know if the TINs submitted are correct) this is an inexplicable mistake by the government which is causing employers to have greater solicitation obligations and is wasting a tremendous amount of time and paper.

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If there are a significant # of mismatches and the information is being pulled off a written/typed W-4/benefit application forms listing dependents (which can be prone to input mistakes due to different handwriting styles), it might be time for a full plan audit of dependents, totally taking off the argument of any type of immigration issues, etc. This might also show good faith overall for the plan if there are a lot of mismatches.

While for payroll purposes a copy of a SS card is not required (unless it is under an I-9 verification), it can still be good business practice to get a copy at some point so that the employer has a reference and can cross-check without having to have the employee bring in every card at the time of mismatch. I have found it to be much easier to get such paperwork at time of hire/enrollment. But know some employers who have later gone in and asked for proof of relationship and copies of SS # (either card or family tax form)

I know personally our family has had to provide information on dependents to the employer quite a few times (dh has changed jobs quite a bit) to prove dependents are true.

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Ryan - helpful article, thank you. And I agree this is wasting a large amount of time and paper (as is much of the ACA)!

Based on your research on the issue - do you believe there's a possibility of errors in the IRS database or errors created by the mismatch process?

Looking solely at employee SSNs - why would this be the first time an employer receives notice of a mismatch for a current employee? If they've been reporting wages for some time now with no issue?

I think this could be a HUGE issue for some employers that nobody is talking about.

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Brainstorming -- I suspect the mismatch algorithm is different than that used for W2 purposes (or other purposes where it is checked such as FAFSA). I don't put a lot of trust in our government to do things the best or easiest way like picking one algorithm that already existed!

I think another large part is dependents information is generally never checked by the employer as they are never paid, etc. They might possibly be checked by the insurance carrier, but I doubt it unless they find a duplicate to someone already on file. I've found with twins that it was more of a name/birthdate search off the main member than a SSN search of the actual dependent. And much of that information comes from hand or screen filled enrollment forms by the parent, some of whom might be misremembering all the kids' SS#s. I know at one point on the FAFSA entering my one DD's social I must have entered it wrong because it came back a few weeks later as a mismatch. So it is easy to do, especially on dependents.

Or there could definitely be a flaw in the SSA data or in the actual algorithm itself. Who knows what database they got their info from, hopefully directly from SSA. I'd actually love to dig into the mismatches and try to figure out where they/we are wrong. I suspect this won't be solved in one cycle.

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I just want to clarify something about the TIN verification process and how it works after discussing the issue with our technology person. The first thing that would occur is the IRS would check to see if the TIN entered on the Form 1095-C exists. If the TIN does not exist, an AIRTN500 message would appear. If the TIN exists, the verification process would go to the second stage of comparing the first four characters entered on the Form 1095-C for that TIN with the first four characters of the last name in the social security administration (SSA) database. If the first four characters do not match, an AIRTN500 message would appear. If the first four characters match, the TIN would be verified. Apparently this is a lot more manageable from a data perspective.

For example, if the IRS was going to verify my name, "Ryan P Moulder", the only characters that would matter are "MOUL". The IRS verification process would begin by checking the TIN entered for Ryan. If the SSA database does not have the TIN, an AIRTN500 error message would appear. However, if the TIN is in the SSA database, the first four characters of the individual's last name, in this case, "MOUL", would be checked against the first four characters of the individual's last name in the SSA database for the TIN entered. If the first four characters from the Form 1095-C and the SSA database do not match, an AIRTN500 message would appear. Alternatively, if the first four characters from the Form 1095-C and the SSA database match, the TIN will be verified.​

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  • 4 weeks later...

I wanted to post my latest two articles on this subject. Hopefully, these are my last two articles on the issue until the final regulations are released. The first article discusses the proposed regulations. https://accord-aca.com/articles/tin-solicitation-proposed-regulations

The second article discusses what we learned in a conversation with the IRS regarding the issue. https://accord-aca.com/articles/incorrect-tin-solicitation-irs-clarification

We hope this helps assist you with the AIRTN500 error messages.

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