No Social Security Number for Employee

[tonia2021]

A client of mine just called. They hired an employee who worked for one month. During the month they paid him 2 paychecks, however the employee never filled out a W4. They have been trying to get ahold of this past employee for several weeks, but he doesn't return their phone calls. What can this employer do? How do they report the wages? If and how do they prepare the quarterly reports that require a SS# and also the W2?

They say they have learned their lesson and no employee will be able to work until the paperwork is complete. We will see.

[Bees Knees]

IRS instructions say that if you don’t get an ID number from the payee at the time you are suppose to give them a paycheck, you are supposed to do backup withholding. Theoretically, the IRS could require the employer to pay the backup withholding that was supposed to be withheld, due to the employee not providing a SSN. I don’t know if IRS will actually demand the backup withholding from the employer, but telling employers they could be subject to backup withholding seems to be a good motivator to get them to follow the rules in the future.

[ChEAr$]

official answer

A client of mine just called. They hired an employee who worked for one month. During the month they paid him 2 paychecks, however the employee never filled out a W4. They have been trying to get ahold of this past employee for several weeks, but he doesn't return their phone calls. What can this employer do? How do they report the wages? If and how do they prepare the quarterly reports that require a SS# and also the W2?

They say they have learned their lesson and no employee will be able to work until the paperwork is complete. We will see.

He was an employee and pay should be recorded as such, even without the number, both for federal and state purposes. And a W2 issued. Pay also subject to SUTA and FUTA.

On the down side, including a w2 without the number might subject client to a penalty.
and will have to deal with state unemployment administration re the number also.

As you're probably aware, another "school of thought" would suggest that the payments not be included as wages, rather as subcontracted services. It's for your client to decide of course.

[JohnH]

Aggravating

I'm dealing with one of those situations right now as well. I suggest that you advise the client IN WRITING that there may be penalties assessed, and that it can take several months before the penalty notices arrive. Then when he gets penalized in 12-18 months from now, and will have conveniently "forgotten" that you warned him, you can whip out the letter and show it to him.

[ChEAr$]

third possibility

favored by some is to play it safe and not take a tax deduction atall for these
payments. it would therefore be a "gift" to the recalcitrant former would-be
employee in the eyes of the employer, although to the receiver it would
nevertheless BE income!

[taxxcpa]

Another sneaky way

Some people record it a contract labor. If it is less than $600, no 1099. If it is more, they just hope the IRS doesn't question it.
There is no correct solution since it is not correct to hire someone without getting their SSN, and I-9 form, etc.

[joanmcq]

One question: when paid, weren't the appropriate taxes w/h at the time?

[Hopper]

I am having the same problem. What is the correct procedure? Employee has left country... probably never legal to begin with. This was in the 2nd quarter of 2007 so 941 has been filed and paid. To take this out of payroll we would have to amend the 2nd quarter. What should I do? amount is $ 1,300 gross.

[Bees Knees]

Make the employer pay it all, plus charge extra for your services.

Quick frankly, I have zero sympathy for employers that pay money to workers, don’t withhold or demand an ID number at the time of the first paycheck, and then whine and complain later that the employee can't be found or skipped the country.

Employers need to learn this lesson fast...get a completed W-4 before issuing that first paycheck, or else be prepared to pay that employee's tax liability.

[taxxcpa]

Illegal immigrants?

There is a good chance that these employees did not have a SSN and were in the USA illegally. I had a client several years ago who, just after the amnesty, had a lot of such employees who suddenly acquired SSNs.
He should get a SSN and have them fill out an I-9 Form, otherwise he could have the deductions disallowed and be in violation of ICE laws.

[oceanlovin'ea]

Same problem

I too have a client that I do payroll for who has a problem of not getting social security numbers from people when they start working. It is actually 2 businesses owned by the same person. Last year was terrible...must have had about 20 or more without social security numbers. This year I have about 6. So there has been much improvement. Her problem is that different people hired employees and let them start working before they furnished social security number or card.

I withheld payroll taxes from the checks. I included the amount in 941 amounts and paid employer share of payroll taxes. I included it in state unemployment and FUTA. So all taxes have been paid on the money.

Now on to the W-2's. Since I don't have mailing addresses for the majority of these people employed by these 2 properties, I have just put W-2's in a sealed envelope with their name on it and the office staff can fill in the address and mail to the employees. For the ones without social security number, I put in an envelope with their name and wrote on it that I can't print W-2 without a social security number. Hopefully those people will request their W-2's and I will have the social security numbers before I have to electronically file the W-2's at the end of March.

That is how I am handling my situation. I did warn them that they might be penalized by IRS for not having the social security numbers.

Linda F