As a small business owner, it is crucial to know when you can or cannot truncate an employee's Social Security Number to avoid issues, delays, and possible fines.
Employers should always have their employee's safety as their number one priority. While physical safety is essential, employers can't forget about their duty to keep an employee's personal and confidential information safe from predators. Truncating an employee's Social Security Number is a simple way to help protect your employee's identity.
A truncated Social Security Number can often be referred to as the Truncated Taxpayer Identification Number (TTIN). To decrease the number of new hire paperwork and other statements that an employee may receive containing their Social Security Number, an employer may truncate the employee's Social Security Number on select documents. To truncate or trim a Social Security Number, the employer can use asterisks or "X"s to replace the first five numbers of the Social Security Number. For example, a Truncated Taxpayer Identification Number may be displayed on a document as "XXX-XX-1234" or "***-**-1234".
As the employer, it is crucial to know when you can truncate a Social Security Number, potentially keeping your employees from falling victim to identity fraud, and when you cannot. When sending an employee their Form W-2, you may be sending it by USPS mail or through email and linking them to a portal.
According to the IRS' General Instructions for Form W-2, you can truncate the Employee's Social Security Number on their copy (the employee copy) of the Form W-2. Since the employee knows their own Social Security Number, they do not need the full number on their copy of Form W-2. However, it is imperative that employers do not truncate the Social Security Number, or any other identifying numbers, on Copy A of the Form W-2, the copy going directly to the Social Security Administration.
Employers should also check with their state to ensure no overruling regulations prevent them from truncating an identification number. The American Payroll Association recently published an article regarding Montana's new guidance on truncated Social Security Numbers. Montana's Department of Revenue (DOR) will not accept any documents filed that include a truncated identification number. Before truncating an Employee's Social Security Number or any other identification numbers on an employee's documents, it is important to check the IRS website and state regulations first.
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