Posted on: Tuesday, March 16, 2004

Be alert for fake Social Security numbers

By Albert B. Crenshaw
Washington Post

WASHINGTON — Which would you rather have the government enforce — tax laws or immigration laws?

You might not think of this as an either-or situation, but it seems to look that way to a lot of federal officials.

It's a principle of U.S. tax policy that anyone who earns money here, citizen or alien, legal or not, should pay taxes on that income.

It's another principle that tax information should be completely confidential and, except in rare circumstances, be unavailable to anyone outside the Internal Revenue Service — and even there it should be limited to workers who need it.

It's a third principle, or at least a rule, that Social Security numbers are used as identifiers for taxpayers. And therein lies a problem.

Social Security numbers have become a de-facto national identifier and have become immensely valuable to people including lenders, retailers and data-gatherers, as well as crooks and illegal immigrants.

As a result, phony Social Security numbers cause big problems.

To get a Social Security number, a person has to be legally allowed to work in this country. For years, the Internal Revenue Service has struggled to find a workable substitute, eventually coming up with individual taxpayer identification numbers, or ITINs, which it has been issuing since 1996 to people who have income but aren't eligible for a Social Security number.

ITINs seem to work for the IRS — through December, it had issued 7.2 million of them, according to Congress' General Accounting Office — but they are creating problems elsewhere.

To the casual eye, ITINs look just like Social Security numbers. They have nine digits, and are formatted just the way Social Security numbers are.

Last year, the GAO was able to use a bogus foreign birth certificate to obtain an ITIN, which it used in turn to open a bank account and get an ATM card. And by simply making up a number and putting it on a fake ITIN card, GAO was able to get a valid voter identification card in a state it did not identify.

The IRS is tightening its rules. A few months ago, the agency sent out a letter to states warning them that ITINs are for tax purposes only and should not be accepted on applications for official documents. And it now issues ITINs in a letter rather than on a Social Security-like card, which may make it harder to fool people. But the GAO said the IRS still does not require that an ITIN applicant appear in person, nor does it verify with third parties the documents submitted with an application.

And the IRS concedes that employers, though required to make an effort to check workers' work eligibility, can meet the legal requirement fairly easily, making it easy for ineligible workers to escape notice.

In some cases, the IRS has tried fining employers, but Commissioner Mark W. Everson told a joint hearing of the House Ways and Means oversight and Social Security subcommittees last week that the fines "have not been sustained on appeal."

Over on the Social Security side, that system is collecting about $7 billion a year it can't match with workers, so it goes into a "suspense file" unless and until the agency figures out to whom it ought to be credited.

A seemingly logical step would be to allow the IRS and the Social Security Administration, and the Homeland Security Department, for that matter, to share data, and perhaps to use ITINs more broadly for non-tax purposes.

However, Everson strongly opposed any non-tax use of ITINs. Such use might well drive these people "further underground" and "we would collect fewer (tax) dollars."

Deputy Social Security Commissioner James B. Lockhart III said, "There's definitely a tension" between taxpayer privacy and the enforcement of other laws, but he said his agency is working to make it easier for employers to check the validity of a prospective employee's Social Security number.

The situation clearly has officials scratching their heads.

In the meantime, though, if you run a small business, check prospective workers' SSNs with the Social Security Administration.

And be alert for misused ITINs. Although they look like Social Security numbers, they begin with a 9 and have either a 7 or an 8 as their fourth digit.