July 28, 2014
IRS Issues Final Regulations on Ability to use Truncated Tax Identification Numbers
By Eugene Kim, Tax & Business Services
The IRS has recently issued final regulations that allow the use of truncated taxpayer identification numbers (TTINs) on payee statements and certain other documents.
An IRS TTIN is an individual's social security number (SSN), IRS individual taxpayer identification number (ITIN), IRS adoption taxpayer identification number (ATIN), or IRS employer identification number (EIN) in which the first five digits of the nine-digit number are replaced with Xs or asterisks. The TTIN takes the same format of the identifying number it replaces, for example XXX-XX-0123 when replacing a SSN, or XX-XXX0123 when replacing an EIN.
Why were TTINs introduced?
With identify theft occurring more frequently in recent years, the IRS introduced a pilot program that allowed filers of information returns to truncate an individual payee's SSN or other nine-digit identifying number on paper payee statements. The pilot program only applied to paper payee statements in the Form 1098 series (e.g. mortgage interest), Form 1099 series (e.g. interest income), and Form 5498 series (IRA and other items). The final regulations expanded the list of forms for which TTINs are able to be used and permits their use on any federal tax-related payee statement or other document required to be furnished to another person except in the following circumstances:
- Where prohibited by statute, regulation, or other guidance published in the Internal Revenue Bulletin, form, or instructions.
- Where a statute, regulation, or other guidance published in the Internal Revenue Bulletin, form, or instructions specifically requires use of a SSN, ITIN, ATIN, or EIN. For example, a TTIN may not be used on a Form W-8ECI or Form W-8IMY because the forms and/or form instructions specifically prescribe use of an SSN, EIN, or ITIN for the U.S. taxpayer identification number.
- A TTIN may not be used on any return, statement, or other document that is required to be filed with or furnished to the Internal Revenue Service.
- A person may not truncate its own taxpayer identifying number on any statement or other document that it furnishes to another person. For example, an employer may not truncate its EIN on a Form W-2, Wage and Tax Statement, that the employer furnishes to an employee; and a person may not truncate its taxpayer identification number on a Form W-9, Request for Taxpayer Identification Number and Certification.
Effective date and clarification that no penalty applies
These final regulations are effective July 15, 2014. Since a TTIN is a permissible method of displaying the taxpayer identification number, use of a TTIN when allowed under these regulations will not result in application of any penalty for failure to include a taxpayer identifying number on any payee statement or other document.
Should you have any questions, please contact your Marcum Tax Professional.