How Soon Will a Company Discover Fake SSN or Tax Details on a 1099 Form?

When providing data on a 1099 form, maintaining accuracy and authenticity is essential. Keeping accurate financial records and adhering to tax regulations are paramount for both businesses and individual taxpayers. An incorrect Social Security Number (SSN) or tax details can lead to serious consequences, including legal issues and financial penalties. Understanding how and when a company might discover such inaccuracies is crucial.

Understanding the Process

Most commonly, a 1099 form is generated based on the information provided on a W-9 form. The company receives the 1099 at the end of the year, based on the W-9 information, and soon files this information with the IRS.

After the IRS processes the batch of 1099s, they will reconcile the data with the W-9s submitted. If there is a mismatch between the tax details and the name, the company will be notified. This process can vary depending on the state and employer requirements.

State-Specific Timeframes

In states like Oregon, where an employer must submit a report of new hires including their SSN within 20 days, the discovery of a fake SSN can be quite swift. However, in other states, the process might take longer.

For example, in California, if new employees are reported monthly, fake SSNs might be discovered within a month. Employers also have the option to use E-verify, which can immediately confirm the authenticity of the SSN during the hiring process. This can make it possible to catch fake SSNs even before the initial interviews.

Employer Reporting Requirements

Employers are required to submit New Employees reports, which can vary in frequency:

Once a week in some states Up to 20 days after the hire date in other states

The goal initially was to catch up on child support cases, but this soon shifted to focusing on tax evasion and welfare fraud. While earlier efforts emphasized child support enforcement, the shift revealed that there were more tax cheats than originally anticipated, and these were often from higher socioeconomic backgrounds.

Reasons for Verification

Employers must verify SSNs to comply with tax and employment laws. The primary reasons for this are:

To prevent tax fraud and ensure accurate withholding of taxes To avoid penalties for non-compliance and maintain a clean tax record To protect the company's reputation and financial stability To maintain compliance with IRS and state regulations

What Happens If a Mismatch Is Discovered?

If a mismatch is discovered, the company will be notified. The company has the responsibility to correct the mistake before the individual files their tax return. If not corrected, the IRS will hold the payment until the next year and then move it to an account to be applied to the government's accounts.

Conclusion

The discovery of fake SSNs or tax details on a 1099 form can happen quickly, depending on the state's reporting requirements and the employer's practices. E-verify is a tool that can help catch fake SSNs early in the hiring process. Employers should take this responsibility seriously to avoid financial and legal issues.