More than 570,000 No Match letters (NML) have been sent by the Social Security Administration (SSA) starting in late March of 2019 with instructions for the Employer to review the name and social security number (SSN) provided on the W-2 form (Wage and Tax Statement) and to provide any necessary corrections to the SSA with “60 days” of receipt of the NML using the Form W2-C. The SSA provides the following answer in the FAQ on the topic of penalties for errors in SSNs provided on a Form W-2:
Will I get penalized by the Internal Revenue Service (IRS) for having an incorrect SSN (TIN) on a Form W-2?
The IRS is responsible for any penalties associated with Form W-2. See Reasonable Cause Regulations and Requirements for Missing and Incorrect Name/TINs, (IRS Publication No. 1586) for more information. This publication provides the following guidance on when reasonable cause for a failure to provide a correct taxpayer identification
REASONABLE CAUSE
To show that the failure to include a correct TIN was due to reasonable cause and not willful neglect, filers must establish that they acted in a responsible manner both before and after the failure occurred and that: there were significant mitigating factors with respect to the failure (for example, an established history of filing information returns with correct TINs), or the failure was due to events beyond the filer’s control (for example, actions of the payee or any other person). Except as otherwise stated in this publication, acting in a responsible manner for missing and incorrect TINs generally includes making an initial solicitation (request) for the payee’s name and TIN and, if required, annual solicitations. Upon receipt of the newly provided TIN, it must be used on any future information returns filed. Refer to Treas. Reg. 301.6724-1 for all reasonable cause guidelines.
HISTORY
Back in July of 2018, the SSA posted via its Employer Correction Request Notices (EDCOR) webpage that it would be resurrecting the use of NML, which would be sent to every Employer with at least one SSN no match. The purpose of an NML is to advise an Employer that corrections are necessary so that the SSA may tie an Employee’s earnings to the correct record/name. The SSA lists many reasons why reported names and SSNs may not be in sync with SSA records, including typographical errors, unreported name changes, and inaccurate or incomplete Employer records among others.
The NML language includes the warning that Employers, “should not take any adverse action against an employee, such as laying off, suspending, firing, or discriminating against that individual just because his or her SSN does not match SSA records.” In fact, any such actions could cause the Employer to violate state or federal law with the associated legal consequences. It is important to remember that an SSA no match letter is relevant as to the accuracy of tax withholdings rather than a notice of suspect work authorization. Still, a SSN can be a selected option by an Employee to show work authorization via a List C document on a Form I-9,which must be completed for new hires and updated, as necessary. It is this nexus between an SSN and a Form I-9 that can lead to issues related to the work eligibility of an Employee.
In August of 2007, the Department of Homeland Security (DHS) published a proposed rule for a new regulation outlining an Employer’s obligations upon receipt of a NML.[1] The proposed rule included a provision that could expose an Employer to “constructive knowledge” of an unauthorized worker in the workforce, if the Employer failed to take “reasonable steps” after receiving a NML. This rule was later rescinded by DHS effective November 6, 2009 due to a lawsuit filed in the Northern District of California by the AFL-CIO, the ACLU Immigrant’s Right Project, and the National Immigration Law Center among others.[2] The U.S. Chamber of Commerce also intervened in the suit based on an allegation that DHS did not comply with the requirements of the Regulatory Flexibility Act to impose this additional burden upon Employers.
In 2007, SSA issued an overview of the NML process and noted that the information related to the W-2 was considered tax information and was therefore protected under section 6103 of the Internal Revenue Code (IRC), which does not allow the SSA to share mismatched name/SSN combinations on the W-2 with other federal agencies. DHS may request information from the SSA, however, to identify and locate undocumented workers while enforcing civil or criminal laws in certain circumstances. 5 USC §552a(b)(7).
The proposed rule outlined steps for an employer to take in order to establish a “Safe Harbor” from penalties post receipt of a NML, which included the following steps:
NOTE THIS PROCESS WAS NOT ENACTED!
1. Employer promptly checks its records no later than 30 days after receipt to determine if the NML was the result of a clerical error by the Employer.
2. If the Employer confirms that it made no clerical error, then the Employer must ask the Employee to confirm the accuracy of the Employer’s records.
3. If necessary, the Employer must ask the Employee to resolve the error with SSA.
4. If the Employer is able to resolve a NML, then the Employer should also verify that the correction was made by SSA using the Social Security Number Verification System (SSNVS).
5. If none of the action items resolves the error within 90 days of receipt of the NML, the Employer should complete within three days, a new Form I-9 for the Employee as if the Employee was a New Hire and not allow any document to be presented for work authorization for the Form I-9, which was subject to the NML.
The receipt of NMLs has remained an often used request by Immigration and Customs Enforcement (ICE) agents in conducting Form I-9 audits. So, Employers have had to continue to address the conundrum of what actions they should take upon receipt of Decentralized Correspondence (DÉCOR) letters sent to Employers by the SSA when an Employee’s W-2 did not have an address or the address provided was not in the Postal Services’ databased. Effective August 23, 2012, the SSA suspended DÉCOR letters for budgetary reasons.
AN NML IS NOT BY ITSELF CONSTRUCTIVE KNOWLEDGE
8 CFR §274a.1(l)(1) defines constructive knowledge as, “knowledge that may be fairly inferred through notice of certain facts and circumstances which would lead a person, through the exercise of reasonable care, to know about a certain condition.” The definition includes when an Employer has information available to it that the Employee is not authorized to work. Knowledge that an Employee is not authorized to work may not be inferred by an Employee’s foreign appearance or accent and depends on the totality of circumstances.
As of April 25, 2019, the civil fines for a first offense of knowingly continuing to employ an undocumented worker were not less than $573 and not more than $4,586 with respect to whom the offense occurred after November 2, 2015. Those Employers engaging in a pattern or practice of knowing hire violations must be fined not more than $3,000 for each unauthorized worker, imprisoned for not more than six months for the entire pattern or practice, or both under 8 CFR §274a.10(a).
SO WHAT TO DO?
Consult with legal counsel to develop a consistent process to address an NML in light of the described tightrope Employers must walk not to act in a discriminatory manner, but to act in a reasonable manner to address the SSA’s notice. In addition, it is important to keep in mind that a higher percentage of undocumented workers in a workforce can lead to allegations of potential criminal management collusion in the employment of such workers.
The SSA has provided a suggested approach to use for a response to the 60 day NML, which is outlined below. This approach though is provided in a vacuum as to the issue of constructive knowledge, which is logical since the SSA does not enforce immigration laws. So, the approach suggested has limited value to Employers. The Department of Justice (DOJ) already provided guidance regarding how Employers might respond in a reasonable period of time to a NML, which of course does not have any sort of 60 day window for penalty exposure. In addition, the SSA NML request for a 60 day response, is just that, a request. For Employers trying to create a uniform policy for a NML response, which is certainly recommended, they need to consider when to establish an initial contact with the Employee based on the NML and what their follow-up plan will be if circumstances may demand further action than just checking for data entry errors.
SSA RECOMMENDED EMPLOYER RESPONSE TO 2019 NML
The recommendation by the SSA in its 2019 NML process is that Employers should:
1. Register for Business Services Online (BSO) – read instructions or view a video
2. Input Activation Codes in BSO (one-time required step to retrieve name and SSN errors) – read instructions or view a video.
3. Retrieve Name and SSN Errors – view a video or read the following:
4. Use the Social Security Number Verification Service (SSNVS) –
read instructions or view the following videos:
Note that the SSNVS process relies on databases, which can contain errors, so it cannot be relied upon to verify work eligibility.
5. Work with your employees to resolve the error. We provided a sample Social Security Number Verification letter you can give to employees. This suggested letter provides no deadline for the Employee to return to the Employer, if he or she is asked to address an unresolved NML. The Department of Justice has provided FAQs noting that 120 days is allowed for Employers enrolled in E-Verify to address a Tentative Non-Confirmation (TNC). For employees choosing to contest a TNC based on SSA information, they must at least visit an SSA office within 8 federal working days “to begin” resolving the TNC.
6. Fix errors using W-2c – read instructions or view a video. Please refer to the “reasonable cause” discussion above as to W-2c penalties.
Department of Justice Guidance
The DOJ’s Civil Rights Division – Immigrant and Employee Rights (IER) Section, which addresses the enforcement of the anti-discrimination provisions concerning the Form I-9 process at 8 USC §1324(b), does still maintain a webpage concerning what Employers should do and not do upon the receipt of an NML, which contains some rather old material. DOJ recommendations include:
DO:
1. Recognize that name/SSN no-matches can result because of simple administrative errors.
2. Check the reported no-match information against your personnel records.
3. Inform the employee of the no-match notice.
4. Ask the employee to confirm his/her name/SSN reflected in your personnel records.
5. Advise the employee to contact the Social Security Administration (SSA) to correct and/or update his or her SSA records.
6. Give the employee a reasonable period of time to address a reported no-match with the local SSA office.
7. Follow the same procedures for all employees regardless of citizenship status or national origin.
8. Periodically meet with or otherwise contact the employee to learn and document the status of the employee’s efforts to address and resolve the no-match.
9. Review any document the employee chooses to offer showing resolution of the no match.
10. Submit any employer or employee corrections to the SSA.
DON’T:
1. Assume the no-match conveys information regarding the employee’s immigration status or actual work authority.
2. Use the receipt of a no-match notice alone as a basis to terminate, suspend or take other adverse action against the employee.
3. Attempt to immediately reverify the employee’s employment eligibility by requesting the completion of a new Form I-9 based solely on the no-match notice.
4. Follow different procedures for different classes of employees based on national origin or citizenship status.
5. Require the employee to produce specific I-9 documents to address the no-match.
6. Require the employee to provide a written report of SSA verification (as it may not always be obtainable).
[1] 72 FR 45611 (Aug. 15, 2007), https://www.govinfo.gov/app/details/FR-2007-08-15/E7-16066.
[2] American Federation of Labor v. Chertoff, 552 F. Supp. 2d. 999 (N.D. Cal 2007).
