The IRS announced that it is extending and modifying a pilot program designed to deter identity theft (Notice 2011-38). Under the program, which was introduced in 2009, filers of certain paper information returns are allowed to truncate the payee’s Social Security number on the payee statement. The notice extends the program to payee statements for 2011 and 2012.
The program covers paper payee statements for forms in the 1098, 1099 and 5498 series. However, Notice 2011-38 specifically excludes Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, because that form is an acknowledgment rather than a payee statement.
The program does not apply to:
1. Information returns filed with the IRS;
2. Payee statements filed electronically; or
3. Any payee statement not specified in Notice 2011-38.
The permission to truncate applies only to individual identifying numbers (that is, Social Security numbers, individual taxpayer identification numbers (ITINs) or adoption taxpayer identification numbers (ATINs)) on the paper payee statements specified in the notice; employer identification numbers (EINs) and filer identification numbers cannot be truncated.
Filers must meet certain requirements, spelled out in the notice, but if they do, they will be treated as having met the various IRS and Treasury requirements that a payee’s Social Security or taxpayer identification number be included on the statement.
The filer must truncate the nine-digit number by replacing the first five digits with an X or an asterisk. Thus, according to the notice, the sample Social Security number 123-45-6789 would be replaced either with XXX-XX-6789 or ***-**-6789.
The IRS has asked for comments on whether payors should be allowed to truncate a payee’s EIN, whether truncation should be permitted on additional types of payee statements, and whether payors should be allowed to truncate a payee’s identifying number on electronically furnished payee statements. Comments should be submitted on or before July 29, and can be emailed to Notice.Comments@irscounsel.treas.gov. “Notice 2011-38” should be included in the subject line.