Truncating Taxpayer Identification Numbers – Is It Enough?

In July, the IRS issued the final rules allowing most payee statements issued either in paper or electronically to use a truncated Social Security Number or Employer Identification Number. So, it would be XXX-XX-1234, or ***-**-1234. The issuer’s TIN can’t be truncated and no truncation is allowed on the forms that go to the IRS – only to the payees. And, because of statutory wording, no truncated TIN on a Form W-2, something that about 85% of individual filers receive.

So, this is a good step among many in trying to reduce the ease of identity thieves obtaining your tax ID number. But it is not enough. Consider the following:

• Unlike truncating on receipts for credit or debit card purchases, truncating tax IDs on payee statements is optional, not mandatory.

• Experts estimate that the easiest numbers of your SSN to figure out are the first 5, not the last 4.

• It does nothing about the trillions of documents of all sorts that exist that have people’s SSNs on them. People save old W-2s and tax returns (even those more than four years old), employment papers, etc. Often, these get tossed without removing the SSNs.

What more do you suggest? What do you think?

Original Post By:  Annette Nellen

Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.

Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.

Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.

Prior to joining SJSU, Annette was with Ernst & Young and the IRS.

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