IRS, SSN & ITIN – Oh My

In an effort to increase security and to properly identify individuals as authorized to reside and work in the U.S., among all of the other changes, enhancements and additions to the issuance of visas and to port of entry procedures, there has also been a change in the way the Social Security Administration processes and issues Social Security Numbers (SSN). What may have once been available to most people legally and physically present in the U.S. with minimal documentation, is now an elusive and much coveted item that may require giving up your soul to the Social Security Administration (SSA) in exchange. A little dramatic perhaps, but talking to the dependents of foreign nationals who are in the U.S. in valid status, not even their souls will get them the much coveted SSN.

Those who are in the U.S. in valid status but with no work authorization are basically out of luck. SSA policy is that they don’t qualify for an SSN, so one will not be issued, except for the very limited and elusive exception of “valid nonwork reason.” SSA proposals and current application of their standards restrict this to instances where the applicant needs the SSN to:

1. Satisfy federal statute or regulation requiring the foreign national to have an SSN to receive federally funded benefit such as TANF or SSI Benefits to which the foreign national has established entitlement.
2. Satisfy state or local law requiring SSN to receive general public assistance benefits to which the alien has established entitlement.

In the past, SSA operational instructions allowed the issuance of an SSN if a local statute or regulation required the SSN. This often included state statutes requiring an SSN to issue driver’s licenses, or for motor vehicle registration. This is no longer the case, making it very difficult for dependents to obtain driver’s licenses, among other things.

In addition to limiting the pool of qualified applicants, the SSA has also added verification procedures prior to issuing an SSN. In light of these new verification methods for foreign nationals who have recently obtained employment authorization, it may take up to two months or longer for such individuals to obtain an SSN. This extensive delay in processing is caused by SSA’s cross-reference and verification with the U.S. Citizenship and Immigration Services (USCIS), formerly INS. Due to the fact that the issuance of the SSN is dependent on USCIS’ confirmation of employment authorization, whether or not USCIS has updated their database and how quickly they respond to the SSA inquiry often leads to these long delays.

It is important to note that the delay should not prevent a company from placing the foreign national on payroll. The USCIS and not the SSA verifies and authorizes employment in the U.S. The foreign national’s I-94 card depicting the status and validity dates is the document verifying the individual’s status in the U.S. and corresponding employment authorization. Therefore, the foreign national can begin employment upon receipt of a valid I-94 card irrespective of the status of their application for an SSN.

According to Internal Revenue Service (IRS) regulations, if an employee does not have a social security number, to initiate employment, the employee has the option of providing documentation verifying that the SSN has been requested from the SSA. When receipt acknowledgement is provided, the employer can then maintain the employee information in their records with the SSA receipt until the SSN is issued. If the SSN is not available at the time the company is filing its return and reporting wages paid to such employee pursuant to regulations, the receipt information and documentation can be submitted in lieu of the SSN.

As a practical matter, an employer may want to discuss the available options with its payroll administrator. Generally, there are two options available: (1) provide the employee with a “dummy” number and enter the employee in the payroll system while applying the appropriate withholdings; or (2) estimate withholding amounts and pay the employee’s net salary. Once the SSN is obtained, the withholding can then be applied to the employee’s account and the company will then need to amend its returns.

For those who have tried to obtain an alternative identifier to the SSN, and applied for an Individual Taxpayer Identification Number (ITIN) with the IRS, that option is also disappearing. The IRS issues ITINs only to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain an SSN from the SSA. ITINs are issued regardless of immigration status because both resident and nonresident aliens may have U.S. tax return and payment responsibilities under the Internal Revenue Code. Individuals must have a filing requirement and file a valid federal income tax return to receive an ITIN, unless they meet an exception (just as limited and elusive as the SSA exceptions).

Concerns over restrictions to obtain an SSN are fundamental. Many of our record keeping systems have been developed with the assumption that an SSN will be available as the primary identifier. As the SSA continues to revise its regulations in an effort to reduce fraud and misuse of social security cards and numbers, it is becoming more and more difficult for foreign nationals temporarily residing in the U.S. to function and lead “normal” lives. What was once a simple task of obtaining a driver’s license or adding a spouse to life insurance or health insurance plans is slowly becoming more difficult than obtaining authorization to enter the U.S. with dependents. Hopefully, our record-keeping systems in industries affecting the day-to-day lives of individuals living and working in the U.S. will be able to adjust quickly enough to allow for efficient and smooth transitions to the implementation of a new “identifier” that is not linked to the now infamous SSN.

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