TIN and SS# don't match

[Acownt4it]

Have a new client this year. Started a partnership. Prepared the partnership return and client gave us a copy of his TIN. All good so far.
Client brought in his personal information and there is a social security number on his W-2 that does NOT match his TIN.
HRBlock prepared his personal taxes last year. I called HRBlock (I know the owner) and he said it is very normal and I shouldn't worry about the mismatch.
I am worried about the mismatch.
What is the proper course of action? I have never come across this before, what do I do?

[Koss]

Mismatch

When you refer to your client's TIN, are you talking about an Individual Taxpayer Identification Number (ITIN)? Or are you talking about an Employer Identification Number (EIN)?

That may sound like a silly question, but TIN is a generic term that technically includes SSNs, ITINs, EINs, and even ATINs. So I'd like to make sure I know what you're dealing with.

If your client has an ITIN, he may be an illegal alien--er... I mean, an undocumented immigrant.

It is in fact common practice for illegal aliens to work using an SSN that isn't really theirs.

The purpose of the ITIN is to allow these workers to file a valid tax return and comply with revenue laws. The ITIN does not authorize them to work in this country. If they gave their employer the ITIN, it would be equivalent to informing the employer that they are not allowed to work in the US.

So it's all done with a wink and a nod.

Is it illegal? Well, yeah. It's a violation of the immigration laws.

But that doesn't change the fact that the person still has to file a tax return, and in order to do that, they need a valid TIN. Since they're not eligible to get an SSN, they get an ITIN.

Our role as tax pros is to prepare an accurate tax return. The IRS has issued explicit guidance on this issue. You can actually file the return electronically, provided that your software supports this particular functionality. You start the return with the ITIN, because that is the taxpayer's correct TIN. But on the W-2 screen, you input the SSN that actually appears on Form W-2. This is the correct way to file the return. It is equivalent to mailing the return, with the correct ITIN at the top of Form 1040, and then stapling Form W-2 to the front of the return, even though it has a different SSN. The IRS accepts this type of return.

Some state revenue authorities will not accept this type of return.

The state may process the tax return, but then refuse to recognize the withholding, because the withholding is tied to the SSN and not the TIN on the tax return. The state then adjusts the return to remove the withholding, and bills the taxpayer for the entire tax liability. That's what typically happens here in Ohio.

But there's no real problem with the federal return.

I'm not going to hunt for a citation right now. But the IRS guidance that I referred to, as to how to file the return electronically, is probably found in a recent supplement to Publication 1345.

BMK

[Acownt4it]

You are correct, I did mean the ITIN.
Thanks for helping with this and I will take a look through pub. 1345 for the citation.

[Koss]

IRS Guidance

Here's a link:

http://www.irs.gov/taxpros/article/0,,id=167629,00.html

Not Pub. 1345, but nevertheless pretty reliable authority. We're not talking about the tax code here; we're dealing with e-file procedures.

BMK