Final Regulations Issued for Use of Truncated Taxpayer Identification Numbers

Posted on by katemley

New IRS Regulations Aim to Fight Identity Theft Through Use of Truncated Taxpayer Identification Numbers

This week, in an effort to safeguard taxpayers from identity theft, the IRS issued its final regulations regarding the use of Truncated Tax Identification Numbers or (TTINs). The final regulations, published on July 15, are amendments to the Income Tax Regulations and Procedure and Administration Regulations, which allow the tax filer to truncate a payee’s identification number on certain documents. The Service states that the amendments are specifically targeted at reducing the risk of identity theft, which can stem from the use of an employee’s entire identification number on documents.

A “Truncated” identification number simply takes an existing nine-digit identification number and replaces the first five numbers with either asterisks or “X”s so that only the last four digits remain. (i.e. A tax identification number of 99-9999999 would become XX-XXX9999). Because a TTIN is merely a method of masking taxpayer identification numbers that already exist, use of a TTIN does not require the Service to issue any new identification numbers or expend any funds for the taxpayer to be able to use a TTIN. The new regulations allow for TTIN to be used for a taxpayer’s social security number (SSN), IRS individual taxpayer identification number (ITIN), IRS adoption taxpayer identification number (ATIN), or employer identification number (EIN) on payee statements and certain other documents.

Before issuing their final regulations, the IRS ran a pilot program, which allowed certain qualified filers to truncate an individual’s payee identification number on a paper payee statements for Forms 1098, 1099, and 5498. This program ran from 2009 to 2010. In 2011 the IRS extended the pilot program for two more years and modified it by removing Form 1098-C from the list of eligible documents.

In January of 2013, the US Treasury and the IRS issued proposed regulations, in response to the growing threat of identity theft and associated tax fraud. The proposed regulations largely mirrored the pilot program, with TTINs permitted on electronic payee statements in addition to paper statements.

The final regulations became effective on July 15, 2014 and permit the use of TTINs “on any federal tax-related payee statement or other document required to be furnished to another person….” TTINs may not be used (1) on any return or statement filed with, or furnished to, the IRS, (2) where prohibited by statute, regulation, or other guidance by the IRS, or (3) where a SSN, ITIN, ATIN, or EIN is specifically required. Further a TTIN cannot be used by an individual to truncate their own identification number on any statement or other document that they give to another person. This includes an employer’s EIN on a W-2 or Wage and Tax Statement that they might give to an employee, and also an individual’s identification number on either a W-9 or Request for Taxpayer Number and Certification. 

If you have questions about the use of TTINs, please contact our office.

Professional Assistance With Long-Term Tax Delinquencies Can Be Key To A Turn Around

Posted on by katemley

If you have experienced a continuing struggle with handling your ongoing employment and income tax filings and payments, you may be facing the stark reality that managing these obligations is getting more and more difficult.  Some businesses have operated off the premise that the federal and state government will perpetually respond to their tax problems in a certain way.  That response by the government, through a series of notices, delayed responses, and payment plans, is changing faster than ever.  This is especially true at the state level.  Businesses should not make what was once predictability of tax collections by the government a part of how they manage their ongoing business expenses.

While the government may not upgrade their technologies as quickly as the private sector, the actions being taken are making a difference in closing the Tax Gap. This is true at the federal level and even more so at the State level.  As Bloomberg Business Week reports, states are taking much more aggressive action to capture lost sources of tax revenue.  States are using better resources of data collection along with other enforcement tools to prevent businesses, large and small, from operating in a non-compliant tax status.

From a business perspective, the stark reality is that there are some businesses on the fringe of existence that may simply be forced to cease operations as the tax collection activity described here intensifies.  It’s my opinion that this is not necessary.  Rather, if these businesses spend less time juggling some of these obligations and direct their time towards the expertise they have related to their primary business function, their likelihood of success is much greater.  We have seen the most success for clients who have long-term tax delinquencies when that client acquires proper legal and accounting assistance.  For a long-term problem, a long term solution is necessary. 

Certified Public Accountants and other tax return specialists can provide a level of service that is invaluable to any business.  Assistance from a tax lawyer can be an important tool which allows for a delinquent taxpayer to create a long term plan for tax debt resolution which is then executed upon by the taxpayer, its accountant and lawyer.  Most clients find that the support of professionals that can readily provide expert guidance on stressful tax matters are invaluable.  The relief provided to the business owner typically gives them the breathing room they finally need from a stressful situation to focus on the reason they entered their business to begin with.  It is highly rewarding for the tax lawyer and accounting professional to observe this process.  No business operation will ultimately succeed with the passion of its owners for the services or products it provides. 

As a tax lawyer I have observed that the combination of a Certified Public Accountant or other tax return professional with the guidance of a tax lawyer is a highly beneficial combination for a delinquent business taxpayer.  The reality is that the Certified Public Accountant or tax return professional likely has all the expertise to resolve these issues, but due to the reality of the tax season, that person lacks the time to provide the level of assistance demanded from a Revenue Officer or other collection agent.  Without the obligations of providing return preparation services for clients, I have found the ongoing demands of dealing with delinquent tax matters for clients to be manageable. 

Ideally, the long term is a viable business with a plan to manage ongoing tax obligations while addressing delinquencies in a manner that does not effectively shut down the business.  Once that plan is in place, the taxpayer’s Certified Public Accountant or return preparation professional can provide services to manage current tax filing and payment obligations.  Should the government return for review of the client’s ability to address the tax delinquencies, the tax lawyer can return to representation to assist with that issue. 

As a business owner with a long term delinquency a critical perspective to have when acquiring professional assistance is that there is no “quick fix.”  A multi-year problem will likely take many months, if not years, to resolve.  But it can, and does, happen.  Feel free to contact us to discuss these issues if you have them.