HELP: ITIN vs SSN

[RayT]

Illegal alien resident is working for wages and has received W-2 with a false SSN. He has a legal ITIN and files his tax returns (several past years) using his ITIN on the return and also appends his W-2 with the false SSN on the return. He has consistently received refunds and has never been questioned by the IRS for a mismatch between W-2 SSN and the ITIN on his return. He tells me he knows 100's of people who file in this manner. Question: Am I at risk to prepare his tax return in this manner?

[thomtax]

Just my opinion

I don't know the official ruling, but to me, if the return was ever looked at the fact that you knowingly filed a false return could possibly raise a question. I'm sure that it is done all the time, without any problems since IRS doesn't seem to make any effort in this area, so you would have to make the decision that you are comfortable with.

LT

[David1980]

Yes, you can file that way. They even changed the Efile system a few years back to allow this to go through electronically (usually a mismatch between the W2 and primary SSN will cause a rejection. Not so if the W2 is a SSN and the primary is an ITIN.)

Basically the employer can't very well pay a W2 to an ITIN, so you're going to end up with W2 with an incorrect SSN but return under ITIN.

[RayT]

RE: HELP: ITIN vs SSN

Thank you for the response. My software automatically inputs the return ITIN (or SSN) into the W-2 screen (eliminating the need to re-enter). Therefore, if I submit the return via efile, it will indicate wages earned under an ITIN. Will that reject the return?

[David1980]

I'm not sure.

Generally, you would get an IRS ERC 139 if the W2 SSN didn't match the primary SSN, with exception "Exceptional processing for ITIN Returns Only" when the primary is an ITIN. The 139 text includes "The software should direct the user to input the TIN from the Form W-2 exactly as it was issued by the employer."

I do not see any reject descriptions in the IRS document (Pub. 1346) specifying a rejection code for ITIN on W2. So it does not look like this would cause a rejection.

However, having a different number on the W2 than what was sent to the IRS on the W2 could cause them to be unable to match up what you send with what they have from the employer. What could happen is that your taxpayer doesn't get credited for their tax withheld, and whomever that SSN really belongs to gets a letter for not reporting income. I would guess the IRS would at least try to find a match, but I don't know.

[Lion]

Override

Override the ITIN on the W-2 to read the SS# that's actually on that W-2, so that you're filing his documents the way the employer filed them with the IRS but his return has his real ITIN in the heading with his name.

[ecb34691]

I agree with Lion. That's what my software says to do. Remember at this time the IRS is only matching the EIN to a known "good" EIN on the e-file. W-2's aren't even in their system yet, they are just begining to enter the SSA system. The W-2 data doesn't go to IRS until SSA has finished with them - up to October before SSA is done.

[veritas]

I am curious

why would you prepare a tax return for someone in our country illegally?

[Bees Knees]

why would you prepare a tax return for someone in our country illegally?

My question as well. You are at risk of being disbarred from practice:

Circular 230:

§10.51 Incompetence and disreputable conduct.
Incompetence and disreputable conduct for which a practitioner may be
censured, suspended or disbarred from practice before the Internal Revenue Service includes, but is not limited to--

....

(l) Giving a false opinion, knowingly, recklessly, or through gross incompetence, including an opinion which is intentionally or recklessly misleading, or engaging in a
pattern of providing incompetent opinions on questions arising under the Federal tax laws. False opinions described in this paragraph (l) include those which reflect or result from a knowing misstatement of fact or law, from an assertion of a position known to be unwarranted under existing law, from counseling or assisting in conduct known to be illegal or fraudulent, from concealing matters required by law to be revealed, or from consciously disregarding information indicating that material facts expressed in the tax
opinion or offering material are false or misleading. For purposes of this paragraph (l), reckless conduct is a highly unreasonable omission or misrepresentation involving an
extreme departure from the standards of ordinary care that a practitioner should
observe under the circumstances. A pattern of conduct is a factor that will be taken into account in determining whether a practitioner acted knowingly, recklessly, or through gross incompetence. Gross incompetence includes conduct that reflects gross
indifference, preparation which is grossly inadequate under the circumstances, and a consistent failure to perform obligations to the client.

Providing council or helping an illegal alien obtain a federal tax refund with a false Social Security Number is illegal and fraudulent.

[gkaiseril]

why would you prepare a tax return for someone in our country illegally?

They owe the taxes and are required by law to file. Also, when they get the imigration status sorted out, they will have to show they filed taxes for any period they worked in the US.

Are tax returns for criminals, drug dealers, prostitiutes outside of Nevada, etc prepared?

Or under what charge was Al Capone convicted in federal court?

Hint: it was not for bootlegging, bribery of public officals, prostitution, Mann law, drug dealing.

Some might consider the Pilgrims illegal imigrants or criminals. The Mayflower Compact unilaterally replaced the original contract with the English sponsors.

[gkaiseril]

The IRS Policy

http://www.irs.gov/businesses/small/article/0,,id=167635,00.html

Headliner Volume 192
February 8, 2007

Tax returns filed with an Individual Taxpayer Identification Number reporting wages paid are required to show the Social Security Number under which the wages were earned. This creates an identification number (ITIN/SSN) mismatch. In the past, returns with this mismatch could only be filed on paper. Now, due to programming changes, the IRS’s e-file system will also accept returns with an ITIN/SSN mismatch.

The IRS needs its partners in the tax professional and software development community to help implement this new e-file capability. The IRS wants to emphasize, to practitioners and taxpayers alike, the importance of taking the following steps when filing these returns:

Use the taxpayer's correct ITIN as the identifying number at the top of Form 1040.
When inputting W-2 information, the SSN should be entered exactly as shown on the Form W-2 issued by the employer.
This programming change will help ensure that the associated tax information is being captured in the most efficient manner possible.


It is Now Possible to e-file a Return with an ITIN/SSN Mismatch

http://www.irs.gov/taxpros/article/0,,id=165705,00.html

[ecb34691]

Thanks gkaiseril - that's what I remembered but couldn't remember the quote from 2007.

[Bees Knees]

They owe the taxes and are required by law to file. Also, when they get the imigration status sorted out, they will have to show they filed taxes for any period they worked in the US.

Are tax returns for criminals, drug dealers, prostitiutes outside of Nevada, etc prepared?

Or under what charge was Al Capone convicted in federal court?

Nobody said illegal aliens were not required to file tax returns.

The question is, why are you filing a return for an illegal alien? Would you have allowed Al Capone to hire you to file his return? You don't see any possible conflict of interest with your ethical requirements as a professional?

[BOB W]

About 4 or 5 years ago I had a referral come in to do just such a return. HRB had been doing their return for the last several years. And yes, they are required to file while they are getting their status applied for. EIC would not be allowed until they get their SS # and then an amended tax return needs to be done to get the full tax benefits.

I did not do the return, not out of any fear but because I would spend too much time on a situation I was not familiar with, so I sent them back to HRB.

[Bees Knees]

Here is an ethical question for you:

Al Capone walks into your office and wants you to fill out his 1040. He hands you a W-2 from McDonalds. You recognize his face with a newspaper article claiming the FBI is trying to tie Capone in with the recent Muggsy Malone bank robbery as a partner in crime.

You ask Capone if he has any other income besides the McDonalds W-2 to declare. He says he got an additional 2.2 million running an illegal gambling joint, 1.7 million in contract killings, and 3.5 million in various bank jobs. He tells you nobody sent him a 1099-Misc for that money. Does it need to be reported (as he starts to reach for something inside his sport coat pocket)?

What do you do?

A. Prepare the return only reporting the W-2 income from McDonalds.
B. Insist that the illegal income must also be reported on his return.
C. Refuse the engagement.
D. Wish you had kept your mouth shut about any additional income.