Whose SSN is Your Client Using?
Recently, someone had a question on a Facebook tax forum. Her client’s wages were being garnished by the IRS. No one would help her – not the IRS, not the Taxpayer Advocate Service, no one. Why?
Uh…her client was working under someone else’s Social Security number.
The real problem in the discussion is, this tax pro couldn’t seem to get it through her head that her client was committing a crime. After all, she says, IRS has a perfectly clear procedure on how to handle the reporting – file the tax return under the individual’s ITIN, but enter the W-2 information exactly as it appears on the W-2. Besides, she says,” I’ve done 1,000s of these returns. “
Does the fact that IRS has a procedure mean that the action of working under someone else’s SSN is legal?
Heck no! IRS always expects us to report illegal income.
Who do think caught Al Capone? Not the FBI - but the IRS.
Why am I writing this today?
Well first of all, her cavalier attitude to the whole problem really got me angry. She’s not thinking at all about the people who’ve been victimized by her client’s practice.
Second, as I wrote today’s MarketWatch TaxWatch column, I started wondering. Have I ever done this?
In about 30 years of tax preparation, I have worked with many illegal aliens. That’s true.
But all of my clients were people working freelance, not using SSNs. Often, they were paid cash. Or, if they did use an SSN, it was one belonging to a friend or relative, with their knowledge and permission.
However! Within the past 4 years I was working on a massive project, filing about 1,000 Homebuyer Credit returns for a builder. In the process, I proudly discovered that the way the law was written, “Illegal aliens” (aka ‘resident aliens’) qualified for the Homebuyer Credit.
So, if I was smart enough to figure out that loophole – does that mean I prepared tax returns for resident aliens with ITINs who worked under someone else’s SSN?
It occurred to me that - surely, we must have!
(Note: Although I didn’t prepare most of those 1,000 returns myself – I did sign them. So, regardless of what my staff did, I am completely responsible.)
How many of those did we do?
Well, it turns out, we prepared about 10 returns for people using someone else’s SSN.
If I had actually thought about it – instead of thinking of the solving the procedural problem – I would have rejected those people from the program completely.
(But that’s what we do, isn’t it? As a tax professional, someone comes to us with a tax challenge, and it’s our job to figure out how to make it work. We don’t pause and think about the morality of the issue (perhaps until later) – just – how do I enter the data into the tax software to produce a truthful and valid tax return – and make the efiling work.)
The builder’s credit division screened all the buyers (and their credit) before selling them a home. So, without even thinking about it, if the builder approved them as buyers, we went ahead and prepared the returns. A one-shot deal.
Though, we did help them when/if their homebuyers credit was rejected. We won every single case (except one – where the buyer lied about not having owned a home within the previous 3 years).
We will not be doing this again, I assure you.
Because during my argument with this individual on Facebook I started to realize – uh oh!
What happens to all the people whose SSNs are being used.
And I put out feelers to get people to tell me their stories.
Can you imagine the horror of learning that someone else is using your SSN to work?
- Suddenly, you start getting CP-2000s from the IRS about your unreported income.
- Suddenly, you cannot file your tax return because someone else already filed using your SSN. (And that JUST happened to one of my clients last week.)
- Uh oh, your credit score starts getting messed up because someone else is opening bank accounts and drawing more money out than they put in.
- Your tax refunds are getting frozen, sometimes for years, because of the conflict due to the tax identity theft.
And then there is the amazing, time-draining, process of reporting the tax identity theft to the IRS, the FTC, the Social Security Administration, the credit reporting agencies. And the need to get a police report filed. And of course, the police don’t want to write a report because there was no tangible theft – so you have to fight them, too, before you get the report filed. (One woman told me that she had to call her state’s attorney general’s office to put pressure on the local PD before they would take her report.)
Then, of course, there’s the helpless fury – because while your identity has been raped, the police, the IRS, etc. refuse to provide you with information to locate the person who stole it. And when you DO manage to find that person yourself – and turn them in to the authorities – they won’t tell you what steps are being taken. Why? Because they are protecting that person’s privacy. Ironic.
As tax pros, what can we do?
If we have clients working that way – especially for any length of time, the employer must want to keep that employee, right? So, contact the employer and work with the employer to help them sponsor this individual for a work visa, Green Card, etc.
After all, the employer MUST know the individual is working under someone else’s SSN sooner or later. They would have been notified by the IRS or SSA that the SSN doesn’t match the individual.
What else? Perhaps if the worker knows someone with an SSN, they can use someone’s ID with permission – instead of buying an existing SSN and making some innocent victim’s life miserable. (Not the best solution – and still illegal. But if all the income is being reported, not nearly as bad as identity theft.)
I don’t know, what else can you think of – short of not working with people who steal someone else’s identity?
The fact is – they ARE here. They ARE working.
How can we help – without making the problem worse – and without collaborating in a felony?
Do YOU have any ideas?
Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.