[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
SECOND IN A SERIES OF SUBCOMMITTEE HEARINGS
ON SOCIAL SECURITY NUMBER HIGH-RISK ISSUES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON SOCIAL SECURITY
and
SUBCOMMITTEE ON OVERSIGHT
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
FEBRUARY 16, 2006
__________
Serial No. 109-60
__________
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
E. CLAY SHAW, JR., Florida CHARLES B. RANGEL, New York
NANCY L. JOHNSON, Connecticut FORTNEY PETE STARK, California
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM MCCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM MCDERMOTT, Washington
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. MCNULTY, New York
PHIL ENGLISH, Pennsylvania WILLIAM J. JEFFERSON, Louisiana
J.D. HAYWORTH, Arizona JOHN S. TANNER, Tennessee
JERRY WELLER, Illinois XAVIER BECERRA, California
KENNY C. HULSHOF, Missouri LLOYD DOGGETT, Texas
RON LEWIS, Kentucky EARL POMEROY, North Dakota
MARK FOLEY, Florida STEPHANIE TUBBS JONES, Ohio
KEVIN BRADY, Texas MIKE THOMPSON, California
THOMAS M. REYNOLDS, New York JOHN B. LARSON, Connecticut
PAUL RYAN, Wisconsin RAHM EMANUEL, Illinois
ERIC CANTOR, Virginia
JOHN LINDER, Georgia
BOB BEAUPREZ, Colorado
MELISSA A. HART, Pennsylvania
CHRIS CHOCOLA, Indiana
DEVIN NUNES, California
Allison H. Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
______
SUBCOMMITTEE ON SOCIAL SECURITY
JIM MCCRERY, Louisiana, Chairman
E. CLAY SHAW JR., Florida SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas EARL POMEROY, North Dakota
J.D. HAYWORTH, Arizona XAVIER BECERRA, California
KENNY C. HULSHOF, Missouri STEPHANIE TUBBS JONES, Ohio
RON LEWIS, Kentucky RICHARD E. NEAL, Massachusetts
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
______
SUBCOMMITTEE ON OVERSIGHT
JIM RAMSTAD, Minnesota, Chairman
ERIC CANTOR, Virginia JOHN LEWIS, Georgia
BOB BEAUPREZ, Colorado EARL POMEROY, North Dakota
JOHN LINDER, Georgia MICHAEL R. MCNULTY, New York
E. CLAY SHAW, JR., Florida JOHN S. TANNER, Tennessee
SAM JOHNSON, Texas CHARLES B. RANGEL, New York
DEVIN NUNES, California
J.D. HAYWORTH, Arizona
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
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C O N T E N T S
__________
Page
Advisory of February 9, 2006 and revised advisory of February 16,
2006 announcing the hearing.................................... 2
WITNESSES
Internal Revenue Service, Hon. Mark W. Everson, Commissioner..... 10
Social Security Administration, Hon. James B. Lockhart, III,
Deputy Commissioner............................................ 14
U.S. Department of Homeland Security, Hon. Stewart A. Baker,
Assistant Secretary for Policy................................. 20
______
Social Security Administration, Hon. Patrick P. O'Carroll,
Inspector General.............................................. 41
U.S. Government Accountability Office, Barbara Bovbjerg,
Director, Education, Workforce, and Income Security Issues..... 45
SUBMISSIONS FOR THE RECORD
Davis, Robert, Rockwall, TX, letter.............................. 76
National Consumer Law Center, Boston, MA, letter................. 76
SECOND IN A SERIES OF
SUBCOMMITTEE HEARINGS ON
SOCIAL SECURITY NUMBER HIGH-RISK ISSUES
----------
THURSDAY, FEBRUARY 16, 2006
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Social Security,
Subcommittee on Oversight,
Washington, DC.
The Subcommittees met, pursuant to notice, at 10:04 a.m.,
in room 1100, Longworth House Office Building, Hon. Jim McCrery
(Chairman of the Subcommittee on Social Security), and Hon. Jim
Ramstad (Chairman of the Subcommittee on Oversight) presiding.
The advisory and revised advisory announcing the hearing
follow:]
ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON OVERSIGHT
CONTACT: (202) 225-9263
FOR IMMEDIATE RELEASE
February 09, 2006
No. SS-11
McCrery and Ramstad Announce
Second in a Series of Subcommittee Hearings on
Social Security Number High-Risk Issues
Congressman Jim McCrery (R-LA), Chairman, Subcommittee on Social
Security, and Congressman Jim Ramstad (R-MN), Chairman, Subcommittee on
Oversight of the Committee on Ways and Means, today announced that the
Subcommittees will hold the second in a series of Subcommittee hearings
on Social Security number (SSN) high-risk issues. The hearing will
examine employer wage reporting. The hearing will take place on
Thursday, February 16, 2006, in the main Committee hearing room, 1100
Longworth House Office Building, beginning at 11:00 a.m.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only. However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee and for
inclusion in the printed record of the hearing.
BACKGROUND:
Employers are responsible for collecting, documenting, and
submitting a new hire's personal information for Social Security, tax,
and immigration purposes. It is the responsibility of the employer and
the new hire to submit accurate information so that eligible
individuals receive the Social Security benefits due them and that the
appropriate taxes are withheld. However, each year, about 4 percent
(about 9 million) of Forms W-2 that employers send to the Social
Security Administration (SSA) to report employees' wages cannot be
associated with the correct worker because they contain name and SSN
information that do not match the SSA's records. These ``mismatched''
W-2s are logged in the SSA's earnings suspense file (ESF).
Research by the SSA Inspector General (IG) and the U.S. Government
Accountability Office (GAO) indicates that in recent years, W-2s logged
in the ESF increasingly represent instances of SSN misuse or fraud and
probable unauthorized work by foreign-born workers. For these reasons,
and because improperly posted earnings could prevent individuals from
receiving the Social Security benefits due them, the SSA IG has
included the size and growth of the ESF among the agency's major
management challenges.
Three government agencies are involved in ensuring employers and
employees submit accurate employment and wage information, and
therefore play a role in addressing the ESF. The IRS is responsible for
tax administration and requires employers to provide name, SSN, and tax
withholding information on their employees and enforces penalties for
failure to provide complete and accurate information for tax purposes,
including penalties for mismatched W-2s. The U.S. Department of
Homeland Security (DHS) is responsible for preventing and detecting
unauthorized work and requires employers to examine documents
establishing the identity and work eligibility status of newly hired
employees to prevent unauthorized immigrants from using false or stolen
SSNs and other documents to illegally gain employment, and also
enforces immigration law. The SSA is responsible for recording each
worker's career earnings history for benefit purposes and processes W-
2s for the Internal Revenue Service (IRS).
The GAO noted in a February 2005 report, that three key factors
contribute to ESF postings: (1) the IRS and DHS require employers to
collect name, SSN, and employment eligibility information, but do not
require employers to independently corroborate the validity of the
information presented; (2) IRS regulations establish a ``reasonable
cause'' waiver with minimal requirements and thus the IRS is unlikely
to penalize employers, while DHS enforcement efforts against employers
who knowingly hire unauthorized workers have been limited in recent
years due to further shifting priorities following the events of
September 11, 2001; and (3) the SSA and DHS offer employers SSN and
employment eligibility verification services free of charge, but these
services are voluntary and underutilized. Both the SSA IG and the GAO
have made suggestions regarding data sharing between these agencies
that could help address the ESF and better target enforcement
activities by the IRS and DHS.
In announcing the hearing, Chairman McCrery stated, ``The growing
earnings suspense file is a symptom of a bigger problem--lack of
enforcement of existing laws and lack of effective coordination between
the responsible Federal agencies. We must carefully examine all
available options and their potential effects on employers, employees,
the government, and the economy to ensure we achieve a workable and
balanced solution.''
Chairman Ramstad stated, ``Accurate wage reporting is important for
a number of government programs. It is clear that there are growing
problems in this area that need to be addressed, and can only be solved
with increased attention and coordination from the three agencies
involved.''
FOCUS OF THE HEARING:
The Subcommittees will examine how employers report wages to the
SSA, the effects of incorrect wage reports on administration of the
Social Security program and tax administration, and enforcement of
hiring and wage-reporting responsibilities by the DHS and IRS. The
Subcommittees will also examine the current employment eligibility
verification process and needed improvements; the potential for data
sharing between the SSA, DHS, and IRS to enhance detection and
prevention of unauthorized work; and options to improve wage reporting.
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* * * CHANGE IN TIME * * *
ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON OVERSIGHT
CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
February 16, 2006
SS-11 Revised
Change in Time for the
Second in a Series of Subcommittee Hearings on
Social Security Number High-Risk Issues
Congressman Jim McCrery (R-LA), Chairman, Subcommittee on Social
Security, and Congressman Jim Ramstad (R-MN), Chairman, Subcommittee on
Oversight of the Committee on Ways and Means, today announced that the
second in a series of Subcommittee hearings on Social Security number
high-risk issues, previously scheduled for 11:00 a.m. on Thursday,
February 16, 2006 in room 1100 Longworth House Office Building, will
now be held at 10:00 a.m.
All other details for the hearing remain the same. (See
Subcommittee Advisory No. SS-11, dated February 9, 2006).
Chairman MCCRERY. The hearing will come to order. Good
morning, everyone. Welcome to our Joint Subcommittee on Social
Security and Subcommittee on Oversight hearing on employer wage
reporting. Today's hearing is the second in a series of
hearings on high-risk issues related to Social Security Numbers
(SSNs). Today, we will examine the longstanding and troubling
issue of how some employers fail to report wages with accurate
SSNs and the inadequate Federal response. Wages that are
reported under incorrect or false SSNs are logged into a
database within the Social Security Administration (SSA) called
the Earnings Suspense File (ESF). This file has records of
earnings that could not be linked to the correct worker.
Employee data was first entered into the ESF in 1937, when
wages became subject to Social Security taxes. Between 1937 and
2003, nearly 255 million wage records for about $520 billion in
earnings, accumulated in the ESF.
The ESF is not just an administrative headache or a
bureaucratic wasteland. It is a symptom of more serious
problems. Research by the SSA's Inspector General (IG) and the
U.S. government Accountability Office (GAO), indicates evidence
of SSN misuse and unauthorized work by foreign-born workers.
For example, according to a GAO study of SSNs frequently
appearing in the ESF, wages claimed by foreign-born workers who
had earnings before they were issued an SSN have grown over
time, from an average of about 7 percent for years 1937 to
1985, to 47 percent for the year 2003.
Inaccurate SSN reporting has repercussions for workers'
Social Security benefits, tax compliance, and immigration law
compliance. Three government agencies play a role when employer
wage reports end up in the ESF. The SSA is responsible for
accurately keeping track of workers' earnings for benefit
purposes. The U.S. Internal Revenue Service (IRS) is
responsible for enforcing penalties to ensure employers report
wages accurately for tax and benefit purposes. The U.S.
Department of Homeland Security (DHS) is responsible for
ensuring unauthorized workers do not work using false
information that results in their earnings records ending up in
the ESF.
Unfortunately, the problem of a growing ESF has existed for
decades. The responsible government agencies have been slow to
work together toward a comprehensive solution. In addition,
they have not adequately enforced the laws and regulations that
would prevent inaccurate wage reporting. Last December, the
House of Representatives passed legislation, H.R. 4437, the
``Border Protection, Anti-Terrorism, and Illegal Immigration
Control Act of 2005,'' which would take action where government
agencies have not by requiring employers to verify the SSNs and
employment eligibility of their employees with SSA and DHS.
Today, we need to hear about what actions Federal agencies
can and will take to address inaccurate wage reporting. We also
want to examine options that Congress should consider to
achieve a balanced and workable approach to improve the
accuracy of wage reporting without unduly burdening employees,
employers, and our economy. I want to thank all of our
witnesses for coming today, and I look forward to your
testimony. Now, I would like to ask my colleague, the Ranking
Member, Mr. Levin, for any comments he may make.
[The prepared statement of Chairman McCrery follows:]
Opening Statement of The Honorable Jim McCrery, Chairman, and a
Representative in Congress from the State of Louisiana
Good morning and welcome to our joint Social Security Subcommittee
and Oversight Subcommittee hearing on employer wage reporting. Today's
hearing is the second in a series of hearings on high-risk issues
related to Social Security numbers, or SSNs. Today, we'll examine the
longstanding and troubling issue of how some employers fail to report
wages with accurate SSNs and the inadequate Federal response.
Wages that are reported under incorrect or false SSNs are logged
into a database within the Social Security Administration, called the
Earnings Suspense File. This file has records of earnings that could
not be linked to the correct worker. Employee data was first entered
into the suspense file in 1937, when wages became subject to Social
Security taxes. Between 1937 and 2003, nearly 255 million wage records
for about $520 billion in earnings accumulated in the suspense file.
The suspense file is not just an administrative headache or a
bureaucratic wasteland; it is a symptom of serious problems. Research
by the Social Security Administration's Inspector General and the
Government Accountability Office, or GAO, indicates evidence of SSN
misuse and unauthorized work by foreign-born workers.
For example, according to a GAO study of SSNs frequently appearing
in the suspense file, wages claimed by foreign-born workers who had
earnings before they were issued an SSN have grown over time, from an
average of about 7 percent for years 1937-1985 to 47 percent for the
year 2003.
Inaccurate SSN reporting has repercussions for workers' Social
Security benefits, tax compliance, and immigration law compliance.
Three government agencies play a role when employer wage reports end up
in the suspense file. The Social Security Administration is responsible
for accurately keeping track of workers' earnings for benefit purposes.
The Internal Revenue Service is responsible for enforcing penalties to
ensure employers report wages accurately for tax and benefit purposes.
The Department of Homeland Security is responsible for ensuring
unauthorized workers do not work using false information that results
in their earnings records ending up in the suspense file.
Unfortunately, the problem of a growing suspense file has existed
for decades. The responsible government agencies have been slow to work
together toward a comprehensive solution. In addition they have not
adequately enforced the laws and regulations that would prevent
inaccurate wage reporting.
Last December the House of Representatives passed legislation, the
Border Protection, Antiterrorism, and Illegal Immigration Control Act
of 2005 (H.R. 4437), which would take action where government agencies
have not, by requiring employers to verify the SSNs and employment
eligibility of their employees with the Social Security Administration
and the Department of Homeland Security.
Today, we need to hear about what actions Federal agencies can and
will take to address inaccurate wage reporting. We also want to examine
options that Congress should consider to achieve a balanced and
workable approach to improve the accuracy of wage reporting without
unduly burdening employees, employers and our economy.
Thank you for coming today, and I look forward to your testimony.
Mr. LEVIN. Mr. Chairman, I have a statement. Let me submit
it for the record. I take it without objection.
[The prepared statement of Mr. Levin follows:]
Opening Statement of The Honorable Sander M. Levin, a Representative in
Congress from the State of Michigan
Today's hearing will examine a long-standing challenge at the
intersection of immigration law and tax collections which may be
growing. GAO and the Social Security Inspector General report an
increasing number of W-2 forms being submitted to the IRS and the
Social Security Administration in which the employee's name and Social
Security number do not match. Some of these ``no matches'' are honest
mistakes, but others represent employees working under false names or
Social Security numbers, either because they are illegal immigrants or
to commit other fraud.
There are larger immigration issues surrounding the failure of some
employers to verify work status for their employees, either at the time
or later, when they are informed that the employee's name and Social
Security number do not match. Those issues are out of the jurisdiction
of the Ways & Means Committee, although I am pleased to see that the
Department of Homeland Security will testify today and may be able to
answer our questions about overall enforcement of immigration laws.
The issue before the Ways & Means Committee is whether the Social
Security Administration and the Internal Revenue Service should share
personal information currently protected by taxpayer privacy laws with
the Department of Homeland Security in order to identify those in this
country and working illegally, and if they did, what burdens that would
impose on the agencies and their collection of income and payroll
taxes.
I hope our witnesses today will help us explore two key issues.
1. First, what impact would such information sharing have on the
effectiveness of our tax collection efforts?
2. Second, would the sharing of taxpayer information substantially
improve our enforcement of immigration laws?
Chairman MCCRERY. Thank you.
Mr. LEVIN. I would just quickly summarize it, because we
want to get on with the testimony, and I am really very glad
that all three of the agencies are represented here today.
We know that data regarding the no--the lack of match in
the reporting. We also I believe have some idea as to what each
of the three agencies is supposed to be doing, what your
primary function is.
So the question today I think, in part, is whether there is
an adequate meshing of your responsibilities and of the
information that you have; whether a primary problem in terms
of our immigration policies relates to the interaction among
the three agencies; what impact there would be on each of your
agencies if there were a further requirement of the sharing of
information.
So we look forward to it. This is not a new problem, and
the immigration aspect of this is not a new issue. We have been
dealing with this for years, and I hope we can approach this
issue with both determination and also with some care. Thank
you.
Chairman MCCRERY. Thank you, Mr. Levin. Any Member wishing
to submit a statement for the record may do so, without
objection. Mr. Ramstad, Chairman of the Subcommittee on
Oversight.
Chairman RAMSTAD. Thank you, Mr. Chairman. As Chairman of
the Subcommittee on Oversight, I look forward to this second
joint hearing in the last 2 years on the topic of Employer Wage
Reporting. Thank you, Chairman McCrery, for your leadership in
this area and for summarizing why we are here today and also
summarizing the last hearing in 2004, when we heard there was a
growing problem with the misuse of the SSN and a failure by
employers to accurately report the names and SSNs of employees.
As we all know, this was contributing to a growing account of
mismatched wages at SSA called the Earnings ESF.
The message of the hearing 2 years ago was that the three
agencies involved in the process, who are represented very well
here today--the SSA, the IRS, and the DHS, needed to work
better together to address the problem.
We are here today to see in the area of information sharing
if progress has been made. This is an important problem for a
number of reasons. When wages are reported to incorrect SSNs,
it can prevent individuals from receiving the Social Security
benefits that are due them, creating a number of other problems
for other government agencies involved, as I think we all
understand.
I just want to highlight, briefly, a couple of my concerns
at the outset of the hearing and look forward to the responses
from the witnesses. First, why is not more being done to
enforce the laws and regulations that require accurate wage
reports from employers. It appears that we have laws on the
books that are not being enforced. In fact, it also appears
that the IRS regulations make it virtually impossible to impose
and collect penalties on employers who report inaccurate SSNs
for their employees. If this is so, we need to know what can be
done to correct this problem and remove this barrier to
enforcement.
Second, I would like to know if the three Agencies--SSA,
the IRS, and DHS--are satisfied with the current level of
information sharing with respect to name and SSN mismatches; in
other words, if progress is being made and if it is
satisfactory progress in terms of the all critical information
sharing. If not, I think this panel needs to know what
additional information they would like to access and why.
Finally, there have been proposals to require that employers do
more to verify the eligibility of their employees for work.
I also look forward, gentlemen, to your views on the impact
of expanded verification. Let me again thank the witnesses for
being here today. I look forward to hearing from you and
working with you to address these important problems. Thank you
again, Mr. Chairman, for your leadership.
[The prepared statement of Chairman Ramstad follows:]
Opening Statement of The Honorable Jim Ramstad, Chairman, and a
Representative in Congress from the State of Minnesota
Today, the Subcommittees on Oversight and Social Security are
holding their second joint hearing in the last two years on the topic
of employer wage reporting. In 2004, we heard that there was a growing
problem with the misuse of the Social Security number and a failure by
employers to accurately report the names and Social Security numbers of
their employees, which was contributing to a burgeoning account of
mismatched wages at the Social Security Administration called the
Earning Suspense File. The message of the hearing was that the three
agencies with a stake in this process--the SSA, the IRS, and the
Department of Homeland Security--needed to work better together to
address the problem.
In many ways, today's hearing seems like, in the words of Yogi
Berra, ``deja vu all over again.'' Little progress has been made since
the Subcommittees last met. The Earnings Suspense File continues to
grow, little enforcement action is being taken, and there is still a
clear need for the IRS, SSA, and DHS to improve their coordination.
This is an important subject for a number of reasons. When wages
are reported to incorrect Social Security numbers it can prevent
individuals from receiving the Social Security benefits due them and
create a number of other problems for the government agencies involved.
In addition, in many cases, employees are providing inaccurate personal
information to employers because they are illegal aliens, and do not
have valid Social Security numbers, and do not have permission to work.
I want to highlight a couple of my major concerns at the outset of
the hearing.
First, I want to know why the IRS does not do more to
enforce the laws that require accurate wage reports from employers. We
have laws on the books that the IRS has apparently never enforced. In
fact, IRS regulations appear to make it impossible to impose and
collect penalties on employers who report inaccurate Social Security
numbers for their employees. I would like to know why this is so, and
what the IRS intends to do about it.
Second, I would like to know if the SSA, IRS, and DHS are
satisfied with the current levels of information shared about name and
Social Security number mismatches.
If not, I would like to know what additional information they would
like to access, and why.
Finally, there have been proposals to require that
employers do more to verify the eligibility of their employees for
work. I look forward to the witnesses' views on the impact of expanded
verification.
I want to thank the witnesses, and I look forward to making some
progress in addressing this growing problem.
Chairman MCCRERY. Thank you, Mr. Chairman. Now, we will
hear from the Ranking Member of the Subcommittee on Oversight,
Mr. Lewis.
Mr. LEWIS OF GEORGIA. Thank you very much, Mr. Chairman.
The Subcommittee on Oversight joined the Subcommittee on Social
Security in today's hearing to discuss issues involving SSNs
that do not match employees' names when submitted to SSA and
the IRS. The Subcommittee held a similar hearing on this
subject just 2 years ago. Under current law, employers are
required to obtain the name and SSN of each worker so that wage
income and tax withholding amounts can be sent to the IRS and
SSA for tax and Social Security benefit purposes.
It is important that this information be correct for the
processing of tax returns and recording of Social Security
benefits. The IRS rejects tax returns and SSA puts earning
records in a ESF when workers' names and SSNs do not match.
Today, I welcome back Commissioner Everson and Deputy Secretary
Lockhart to discuss these issues again with us. In addition, I
welcome Assistant Secretary Baker from DHS, Inspector General
O'Carroll from SSA, and Barbara Bovbjerg from GAO.
Some propose that the DHS have access to more SSA and IRS
information to target employers involving illegal workers for
immigration enforcement purposes and to mandate that employers
verify that all individuals they employ are authorized to work
in the U.S. Mr. Chairman, I look forward to the testimony of
these witnesses, and I thank them for being here. Thank you,
Mr. Chairman.
[The prepared statement of Mr. Lewis of Georgia follows:]
Opening Statement of The Honorable John Lewis, a Representative in
Congress from the State of Georgia
The Oversight Subcommittee is joining the Social Security
Subcommittee in today's hearing to discuss issues surrounding Social
Security numbers that do not match employees' names when submitted to
the Social Security Administration (SSA) and Internal Revenue Service
(IRS).
The Subcommittee held a similar hearing on this subject two years
ago. Under current law, employers are required to obtain the name and
Social Security number of each worker so that wage income and tax
withholding amounts can be sent to the IRS and SSA for tax and Social
Security benefit purposes. It is important that this information be
correct for the IRS's processing of tax returns and the SSA's recording
of Social Security benefits. The IRS rejects tax returns and the SSA
puts earning records in a ``suspense file'' when workers' names and
Social Security numbers do not match. I welcome back IRS Commissioner
Everson and SSA Deputy Secretary Lockhart to discuss these issues again
with us.
An additional witness has been added to our witness list this year.
I welcome Assistant Secretary Baker of the Department of Homeland
Security (DHS). Some propose that the DHS have access to more SSA and
IRS information (1) to target employers involved in hiring illegal
workers for immigration enforcement purposes and (2) to mandate that
employers verify all individuals' authorization to work in the U.S.
before hiring. I will be interested in your views on these and other
issues raised in your testimony.
Thank you.
Chairman MCCRERY. Thank you, Mr. Lewis. Now, we will
welcome our first panel of the day: the Honorable Mark W.
Everson, Commissioner, IRS; the Honorable James B. Lockhart,
III, Deputy Commissioner of SSA; the Honorable Stewart A.
Baker, Assistant Secretary for Policy at DHS.
Welcome, gentlemen. Thank you very much for appearing
before us today, and if you would, your entire written
testimony will be submitted for the record, but if you could
summarize that in about 5 minutes, we would appreciate that. We
will begin with Mr. Everson.
STATEMENT OF THE HONORABLE MARK W. EVERSON, COMMISSIONER,
INTERNAL REVENUE SERVICE
Mr. EVERSON. Thank you Chairman Ramstad and McCrery,
Ranking Members Lewis and Levin. Now, I mentioned the Oversight
Committee first, sir, just because that is out of pure self-
interest. I appreciate the opportunity to appear before you
today. I commend you for your continuing interest in SSN high-
risk issues. Simply stated, there are two important public
policy interests at issue today. As a former Deputy
Commissioner of Immigration, I know that a sound system of
immigration is one which allows only those here legally to
remain in our country.
On the other hand, in my job as IRS Commissioner, we want
our share of your money whether or not you earned it legally or
illegally. Two years ago, you convened a hearing where we
talked about the I-10 program. Since that time, the
improvements to that program, which we spoke about, have had
the desired effect. I-10s are increasingly associated with the
filing of tax returns and less a source document for identity
creation. That is good news for tax administration.
Nevertheless, while our actions have helped tax
administration in the sense that individuals who might not
otherwise do so are filing tax returns and participating in the
tax system, they have not done anything to reduce SSN
mismatches. As both Commissioner Lockhart's written testimony
and my own indicate, there are millions of mismatches each
year. I would make two points about the mismatches. The first
is that over 50 percent of the mismatches occur in just four
states--California, Texas, Florida, and Illinois. Almost 29
percent of the mismatches take place in California alone;
whereas, only 12 percent of 1040s are filed in that State.
Secondly, I would note that about 75 percent of the
mismatched W-2s report wages of less than $10,000. In fact, the
average wage of all mismatches is only about $6,700 annually.
The current process for following up on mismatches lags well
behind the date of hire for the employee in question. Many of
the employees generating a mismatch letter have long since
terminated their employment. The system as it operates today is
simply not timely. The IRS has been asked whether we could do a
better job of issuing penalties for employers who fail to
include accurate SSNs or TINs on their employment returns.
Under the law, we may impose a penalty of $50 on an employer
for each W-2 or 1099 that omits the required information or
includes an inaccurate SSN or TIN, unless the filer shows
reasonable cause for the omission or inaccuracy.
The law, however, places the burden on the employee or
payee to provide the employer or payor with an accurate SSN or
TIN. This is an important distinction. The GAO and others have
suggested that we reexamine our due diligence or reasonable
cause standards. I am also aware that there are calls to
increase information sharing amongst Federal agencies.
As Members of Ways and Means well know, the standards of
6103 pertaining to the protection of taxpayer information are
quite strict. Any effort to improve employer verification
through increased information sharing should take into account
the implications to 6103 and taxpayer privacy. Thank you.
[The prepared statement of Mr. Everson follows:]
Statement of The Honorable Mark W. Everson, Commissioner,
Internal Revenue Service
Chairman Ramstad, Chairman McCrery, Ranking Members Lewis and
Levin, and Members of the Subcommittees on Oversight and Social
Security, thank you for the opportunity to once again appear before you
to discuss these issues.
I would like to do two things this morning. First, I wish to try to
frame the issues, at least from an IRS perspective. Second, I want to
discuss in more detail IRS's role in this process and what we have done
and are doing internally relative to the issues that surround the
mismatching of Social Security Numbers (SSN).
Framing the Issues
Perhaps the most difficult part of these issues is framing them
properly and understanding fully the different, yet sometimes
complementary, roles performed by the Social Security Administration
(SSA), the U.S. Department of Homeland Security (DHS) and the Internal
Revenue Service (IRS).
We at the IRS support and appreciate the jobs being done at SSA in
maintaining and protecting the Social Security Trust Funds and at DHS
in enforcing our immigration laws, but our function is tax
administration. Our job is to make sure that everyone who earns income
within our borders pays the proper amount of taxes, even if they may
not be working here legally. If someone is working without
authorization in this country, he or she is not absolved of tax
liability. Instead of an SSN to file a tax return, that person
frequently uses an Individual Taxpayer Identification Number (ITIN).
Almost two years ago, these same Subcommittees held a hearing where
I talked about our ITIN program. While I understand that is not the
subject of this hearing, it is important to understand that the ITIN
program is bringing taxpayers into the system. In calendar year 2005,
we had 1.6 million applications for ITINs, which were accompanied by
1.4 million returns. The number of returns associated with ITIN
applications is up 40 percent from calendar year 2004.
I know many Members of these Subcommittees are vitally concerned
with the issues surrounding mismatching names and social security
numbers and I am well aware of various legislative proposals to help
address this problem. These proposals range from requiring the
employers to check the validity of a SSN prior to hiring, to increasing
penalties on employers who fail to submit a proper SSN for an employee,
to requiring more information sharing between Federal agencies.
Whatever the ultimate solution, we have to try to minimize the negative
consequences on employers, employees and our national economy.
As you know, comprehensive immigration reform--including border
security, interior enforcement, and a temporary worker program--is a
top Administration priority. The Administration believes that worksite
enforcement is critical to the success of immigration reform. Further,
as immigration laws are enforced, the Administration believes that
comprehensive immigration reform also requires us to improve those laws
by creating a temporary worker program that rejects amnesty and
relieves pressure on the border.
As the Commissioner of the IRS, it is not my role to advocate
public policy changes. However, as a former Deputy Commissioner at INS,
I am sensitive to the need for a system of immigration that functions
effectively. I can, also, if you like, talk about the impact of various
proposals on tax administration.
IRS's Role in the Mismatch Program
Each year, employers send their W-2s and W-3s into the SSA by
February 28 (or March 31 if filed electronically). The SSA processes
and then attempts to reconcile any mismatches. They then send the
information to the IRS on a weekly basis. IRS culls out any unusable
records and those W-2s which are not related to the current tax year.
For Tax Year (TY) 2004, the resulting IRS file contained more than 231
million W-2s from the SSA. This represents a decline of approximately
6.5 percent from the corresponding file for TY 2000. At this point, we
are unable to explain this decline in the number of W-2s, but it is an
area of concern for tax compliance, particularly if it represents
misclassification of employees as independent contractors or otherwise.
The decline in the number of W-2s has been accompanied by a
corresponding decline in the number of mismatches that could not be
validated.
Of the 231 million W-2s in IRS's TY 2004 file, approximately 223
million had matching names and SSNs. Some of these matches resulted
from SSA's successful use of their techniques for resolving mismatches.
For the balance of approximately 8 million TY 2004 W-2s for which there
was no valid match, IRS used several additional methods to match the
numbers. We were able to match approximately 60 thousand more names
with SSNs, leaving a balance of about 7.9 million W-2s where there is
no valid name and social security number match.
To help correct SSN mismatches, the SSA sends letters to both
employers and employees asking that they take steps to match the names
with the SSNs. These letters do not go to all employers. Letters are
sent to employers who submit a wage report containing more than 10
Forms W-2 that SSA cannot process, and the mismatched forms represent
more than one-half of one percent (\1/2\ percent) of the total Forms W-
2 in the report. In TY 03, the SSA sent over 121,000 such letters to
employers, inquiring about 7.2 million invalid W-2s. Thus, there is no
letter sent to the employers of the other 0.7 million mismatches
There are two interesting aspects to these mismatches. The first is
geographical. Over 50 percent of the mismatches are found in four
states, California, Texas, Florida and Illinois. California has the far
greatest number of mismatches totaling nearly 2.3 million, or
approximately 29 percent of the mismatch total.
The second is economic. About 75 percent of all mismatched W-2s
report wages of less than $10,000. If we focus only on those mismatched
W-2s with no withholding, the percentage increases to 90 percent. Only
about 2 percent of all W-2s with invalid SSNs report wages greater than
$30,000. In fact, the average wage for all mismatches is only about
$6700 annually. Bear in mind, that many employees receive more than one
W-2 in a tax year, so these numbers may not reflect gross income.
From a tax administration perspective, we know that for TY 2004
there were approximately $53 billion in wages reported on W-2s with
invalid social security numbers, with about a quarter of that amount,
or $13.3 billion, on W-2s with no withholding. About 56 percent of the
$53 billion came from W-2s reporting wages between $10,000 and $30,000.
On the high end, only about 1 percent of the wages ($0.5B) were
reported on mismatched W-2s showing wages in excess of $100,000.
Average wages on these W-2s were about $303,000, and about 30 percent
of the mismatches in this category had no withholding.
Legal Requirements on Employers
It is important to point out that the SSA has no enforcement power,
and cannot impose penalties on employers for failure to correct SSN
mismatches. IRS, however, does have enforcement power and can assess
penalties. Therefore, it might be helpful if I walk you through our
legal authority.
Under section 6041 and 6011 of the Internal Revenue Code (IRC)
employers and other payors must include correct SSNs or Taxpayer
Identification Numbers (TINs) on forms W-2 reporting wages or salaries
paid to employees.
Under section 6721, we may impose a $50 penalty on an employer for
each W-2 or 1099 that omits or includes an inaccurate SSN/ TIN unless
the filer (employer, other payor, etc.) shows reasonable cause for the
omission or inaccuracy. The maximum penalty for any employer or payor
in a calendar year is $250,000. If the violation is deemed to be
willful, the fine is the greater of $100 or 10 percent of the
unreported amount per violation with no maximum.
Section 6109 places the burden on the employee or the payee to
provide the employer or payor with an accurate SSN or TIN. This is an
important distinction because the employer can have any penalty imposed
for failing to include an accurate SSN or TIN on the return abated, if
the employer made an initial and, if necessary, annual request that the
payee provide an accurate SSN/TIN, or establishes that due diligence
was otherwise used, such as by obtaining a statement from the employee
under penalties of perjury that the SSN or TIN is accurate.
As you can see, what is important here is that the employer or
payor makes a request, or repeats a request, for an accurate SSN or
TIN. If he does, he has performed due diligence and has reasonable
cause to believe the SSN or TIN is correct. As a result, under section
6724, a penalty assessed against an employer under section 6721will be
abated. These liberal due diligence standards for employers serve an
important role in tax administration. Imposing harsh or inflexible
penalties on employers could drive them into the cash economy, with no
reporting at all.
As I indicated when I was before these two Subcommittees in 2004,
because of the reasonable cause provision in the tax law, I am unaware
of IRS sustaining any penalty against an employer for failure to
provide an accurate SSN for an employee. That has not changed.
Problems Associated With Sustaining Penalties
The fact that we have not sustained a penalty against an employer
probably shocks many of you. To some extent, it shocks me as well.
The U.S. Government Accountability Office (GAO) and others have
suggested that perhaps we should re-examine our due diligence or
reasonable cause standard and we have pledged to look at that with
input from SSA and DHS. However, based on what we know now both about
the employer base and the employees subject to mismatches, we have been
unable to settle on any specific changes in the reasonable cause
standard that might be warranted. However, we will continue to look at
it and evaluate it in light of any new information.
For example, our Small Business/Self-Employed (SB/SE) division
recently conducted its own analysis of a small number of employers with
a high percentage of mismatches. What we found points out some of the
difficulties associated with either assessing or sustaining a penalty.
From the information provided by SSA on invalid SSNs, SB/SE
selected a group of 297 businesses, all of whom had reported invalid
social security numbers for 75 percent of their employees. In essence,
these were the worst of the worst in terms of invalid numbers. The
limited size of this study limits its usefulness, but it does provide
some interesting information.
IRS sent a survey to each of these employers with instructions to
complete it and return it within 30 days. We identified our first
problem when the address we had for 58 companies on the list was either
incorrect or the questionnaire was returned as undeliverable.
Another 48 companies did not respond at all. This was a bad move on
their part in that we told them in the cover letter that if they failed
to respond to the questionnaire that they would be subject to
penalties. We are already in the process of starting these
examinations.
That left us with a sample of 191 companies that responded in some
way to the questionnaire.
Of these 191 companies, 57 percent were in three industry
categories, agriculture (30 percent), temporary labor (18 percent) and
janitorial (9 percent).
We asked several questions about hiring practices and verification
procedures. Specifically, 76 percent of the respondents said they asked
for a social security card. Thirty-eight percent said they would not
hire someone who did not have a social security card.
This number in particular intrigues me, as I am sure it does you.
Remember these are companies in which 75 percent of the SSNs on the
employee W-2s were invalid. If, in fact, these employers did demand a
social security card prior to hiring, then it may point to the
widespread availability of forged or fake social security cards.
When we asked these employers what steps they took to verify the
SSN provided by their employees, more than half said they took no
action at all. Only eight percent said they used the Social Security
Administration's telephone verification system, and only four percent
said they used the SSA's electronic verification system.
On average, companies in the survey had an annual turnover rate of
125 percent. The highest turnover rate was more than 400 percent.
Undoubtedly, this makes it very difficult to follow up with employees
when SSA notifies them of the SSN/name mismatch.
Contributing to this problem is the lag time between when an
employee is hired and when the employer learns that he/she has been
given an invalid number.
For example, an employee who is hired today will complete his or
her W-4 form (Employee's Withholding Allowance Certificate) and I-9
(required by DHS). Typically these are held on file in the employer's
office.
At the end of this year, the employer will send the employee's W-2
along with those of his or her other employees to the SSA. These are
due at SSA by February 28 (or March 31 if filed electronically). SSA
begins to sort the forms and within a few weeks concludes that there is
a mismatch between the name and social security number given by the
employee. A letter is then sent by SSA, first to the employee and then
later to the employer (assuming the employer meets the SSA screening
criteria), telling them that the SSN provided by the employer is
invalid.
In this scenario, a year or more has passed before the employer
learns for the first time that the number given by an employee is bad.
If a business has a high turnover rate then it is unlikely the employee
is still with the same company.
The lag time is even greater for the IRS. The earliest we will know
of a possible mismatch will be in June when we begin our own efforts to
correct the mismatches that have been identified by SSA. We will scrub
the numbers through our filters for the rest of the year to see if we
can find a match. As a result, two years have passed from the time the
employee was originally hired before we even begin to think about doing
some type of examination of the employer.
General Conclusions
Based on all of the work we have done in the mismatch area, we can
draw some general conclusions:
Individuals in the mismatch file tend to be low wage
earners. Approximately 75 percent earn less than $10,000 and 98 percent
earn less than $30,000.
There is withholding on nearly 50% of the wage earners in
the mismatch file but there tends to be significantly less withholding
among the mismatches as compared to returns with valid social security
numbers.
The analysis of our limited group of 191 companies shows
that most of the employers (57 percent) fall into three business
groups, agriculture, temporary employment and janitorial.
That same small group experienced extremely high
turnover, making it likely that by the time an employer is advised of a
mismatch, the employee has already left the company.
Employers may or may not be notified that there is a
mismatch, depending on whether they meet SSA's screening criteria.
There does not appear to be much potential to collect
significant penalties from employers under the current system because
they can easily show due diligence.
Considerations Concerning Changes to Current Penalty Program
We continue to consider ways to improve the current system and
stand ready to work with our colleagues at SSA and DHS in any manner we
can. For instance, we just announced a partnership between the IRS and
the United States Citizenship and Immigration Services (USCIS) to
conduct a pilot test to identify options to overcome the challenges
surrounding data sharing between the two agencies. The GAO in a recent
report indicated that data sharing between IRS and USCIS can help
improve (1) tax compliance if businesses applying to sponsor immigrant
workers are required to meet tax filing and payment requirements, and
(2) the accuracy and timeliness of USCIS's immigration eligibility
decisions if it obtained tax data from IRS to help insure business
sponsors meet eligibility criteria. The project has a June 2007
implementation date.
In addition, we would, of course, work to execute any changes
Congress determines to bring into effect. We would, however, call two
issues to your attention that could be problematic with certain changes
in the current regime.
First, any significant change requiring improved information
sharing between Federal agencies or between Federal agencies and
employers must account for protections found in section 6103 of the
Internal Revenue Code. This section protects taxpayers from having
their tax return information shared with third parties.
Second, we must make sure that any change in the current system
encourages the type of behavior that we desire from both employees and
employers. Imposing procedures on employers that are too stringent or
requiring too much documentation from employees may have the effect of
driving certain economic activities ``underground''. At least now we
are collecting some taxes in these areas and we are working to collect
even more.
Thank you for inviting me to testify this morning. I will be happy
to take any questions you may have.
Chairman MCCRERY. Mr. Lockhart.
STATEMENT OF THE HONORABLE JAMES B. LOCKHART III, DEPUTY
COMMISSIONER OF SOCIAL SECURITY, SOCIAL SECURITY ADMINISTRATION
Mr. LOCKHART. Chairman Ramstad, Chairman McCrery, Ranking
Members Levin and Lewis, and Members of the Subcommittee, thank
you all for asking me here today to discuss the steps that SSA
has taken to strengthen the wage reporting process. I will
summarize my written statement with a focus on our efforts to
reduce the Earnings ESF and on our cooperative efforts with
other Federal agencies.
The primary purpose for the SSN--for assigning a number and
issuing a card is the same today as when we started doing this
in 1936: it is to accurately report and record the earnings of
people who work in jobs covered by Social Security. Earnings
posted to an individual SSN are used to determine eligibility
for and the amount of Social Security benefits for that worker
and for his/her family. In order for wages to be credited, the
worker's name and SSN on the W-2 must match the name and number
on our records. We process about 235 million W-2 reports
annually, coming from about 6.6 million employers, and that
represents a total wage amount of about $4 trillion.
To prevent mistakes, we encourage employers to use our
employee verification system or our newer Social Security
Number Verification System (SSNVS), the latter system permits
employers to verify via the Internet the accuracy of employees'
names and SSNs. This service was expanded to all employers last
June. We estimate between these two systems and the Basic
Pilot, which I will talk about later, we have had 67 million
verifications last year. About one million was from the Basic
Pilot. After the W-2s are filed, we process them. We have about
10 percent invalid names and Social Security combinations at
that point. We have a whole series of computer routines to
identify commonly occurring errors. Using these routines, we
post more than half of this 10 percent to the correct SSN. The
remainder is recorded in the ESF.
For the latest year, for which we have information, which
is taxpayer year 2003. As of October 2005, about 8.8 million or
3.7 percent of the total W-2s remained in the ESF. They
represent about $58 billion in wages and $7.2 billion in
payroll taxes. I hasten to add that those payroll taxes have
been credited to the trust funds. We carry out a number of
activities to further reduce the ESF. For example, we notify
all employees when we cannot process their W-2s due to
mismatches and ask them to work with us to resolve the
problems. We also notify employers with a significant number of
mismatches. The intent of these no-match letters is to improve
the accuracy of wage reporting. We also request the employer to
submit corrected W-2s so that the future earnings will be
accurate.
Beginning in April 2003, we implemented a new process that
we estimate will electronically find another 30 million
matches. Already this new process using innovative techniques
and the worker's detailed earnings record has matched 11
million W-2s with the correct earnings record. Despite all
these efforts, the file continues to grow. Our IG, Pat
O'Carroll, whom you will hear from later, and many others
believe that this growth is due to unauthorized work by non-
citizens and that stronger worksite enforcement is needed.
President Bush has called for comprehensive immigration reform,
including stronger border security, strengthened worksite
enforcement, and a temporary worker program. Our ability to
improve our employee wage reporting process depends on
cooperation with other Federal partners, such as DHS and the
IRS, who are with us today, and the U.S. Department of State.
An important cooperative effort is the Basic Pilot, which
is a nationwide system in which SSA supports DHS in asssisting
employers to confirm employment eligibility for newly hired
workers. Participating employers register with DHS to use its
automated system and to provide employee information to SSA to
verify the name, date of birth, and SSN. If we cannot also
verify U.S. citizenship, DHS reviews whether the employee is a
work-authorized non-citizen. In all cases, they notify the
employer of the employee's current work status.
In conclusion, I want to thank you for inviting me here
today. I look forward to working with you to continue to
strengthen Social Security's employer wage reporting process,
and I will be happy to answer any questions.
[The prepared statement of Mr. Lockhart follows:]
Statement of The Honorable James B. Lockhart, III, Deputy Commissioner
of Social Security, Social Security Administration
Chairman McCrery, Chairman Ramstad, Ranking Members Levin and
Lewis, and members of the Subcommittees:
Thank you for asking me to be here today to discuss the steps the
Social Security Administration (SSA) has taken to improve and
strengthen the wage reporting processes and our efforts to reduce the
size of the earnings suspense file, which I will describe in more
detail later. SSA is committed to ensuring that we maintain accurate
earnings records for all workers, and we have taken vigorous steps to
improve our processes.
Purpose of the SSN
The primary purpose for which SSA assigns a number and issues a
card is the same today as it was at the program's inception in 1936: to
accurately report and record the earnings of people who work in jobs
covered by Social Security. Of course, the key to tracking a worker's
earnings is the Social Security number (SSN).
SSA has assigned over 433 million SSNs since 1936. Earnings posted
to an individual's SSN are used to determine eligibility for and the
amount of Social Security benefits to which that worker and his or her
family may be entitled. Ultimately, the SSN is also used to track
payment of those benefits.
The Social Security card was not designed to be a personal
identification document--that is, the card does not establish that the
person presenting the card is actually the person whose name and SSN
appear on the card. Although the card itself is counterfeit resistant,
it does not contain information that would allow the card to be used as
proof of identity.
Over time, SSA developed different tools to assist employers in
verifying a worker's SSN. We encourage employers to use any of these
processes to improve the accuracy of wage reports so that Social
Security can properly credit employees' earnings records. In addition,
the use of verification processes minimizes the employer's processing
costs and reduces the number of forms that an employer may need to
submit.
Initially, SSA used a manual process for verifications, which was
highly labor-intensive. This process became increasingly cumbersome
over time as the verification workloads increased.
Over the years, SSA has worked to offer employers alternative
methods to verify SSNs. One of those methods is the Employee
Verification System (EVS). EVS is a free, convenient way for employers
to verify employee SSNs. It provides employers with several options
depending on the number of SSNs to be verified. For up to five SSNs,
employers can call SSA's toll-free number for employers (1-800-772-
6270) weekdays from 7:00 a.m. to 7:00 p.m. Eastern Standard Time.
Employers may also use this number to get answers to any questions they
may have about EVS or to request assistance. In Fiscal Year 2004, SSA
responded to nearly 1.4 million calls.
Employers also have the option to submit a paper listing to the
local Social Security office to verify up to 50 names and SSNs. In
addition, employers may use a simple registration process to verify
requests of more than 50 names and SSNs or for any number of requests
submitted on magnetic media. Currently, almost 17,000 employers have
registered for this verification service.
To further increase the ease and convenience of verifying employee
SSNs, SSA developed the Social Security Number Verification Service
(SSNVS), which is an internet option that permits employer's to quickly
verify the accuracy of employees' names and SSNs by matching the
employee-provided information with SSA's records. SSA expanded this
service to all employers in June 2005. We processed over 25.7 million
verifications for over 12,000 employers in 2005.
On June 2, 2005 the Commissioner of Social Security announced the
nationwide rollout of the Social Security Number Verification Service
(SSNVS) at the SSA sponsored National Payroll Reporting Forum in
Baltimore, Maryland. SSA has publicized SSNVS in various ways. An
article on SSNVS was placed in the SSA/IRS Reporter that is sent to
over 6.5 million employers. It was also featured in the SSA wage
reporting email newsletter, W2News. We have also highlighted SSNVS in
our many speaking engagements before the employer community. There is a
special section on SSA's website for employers that highlights and
explains the use of SSNVS.
In addition, employers may participate in the Basic Pilot program,
an ongoing initiative in which SSA supports the Department of Homeland
Security (DHS) in assisting employers confirming employment eligibility
for newly hired employees. Participating employers register with DHS to
use the DHS' automated system to verify an employee's SSN and work
authorization status. The information the employer submits to DHS is
sent to SSA to verify that the social security number and name
submitted match information in SSA records. SSA will also confirm US
citizenship, thereby confirming work authorization; DHS confirms
current work authorization for all non-citizens. DHS will notify the
employer of the employee's current work authorization status. This
program is also available to all employers, subject to available
resources.
In 2005, through the EVS, SSNVS, and Basic Pilot programs, we
estimate we provided a total of 67 million employer verifications, up
from 62 million in 2004.
The Wage Reporting Process
I would now like to discuss the process for reporting and crediting
wages. Our role in the wage reporting process is to ensure that all
workers receive credit for the work for which they and their employers
paid Social Security taxes.
Employers report wages to SSA on Forms W-2 (Wage and Tax
Statement). SSA processes the Form W-2 data for tax purposes for the
Internal Revenue Service (IRS). Self-employed individuals report
information on self-employment income to IRS on Schedule SE. IRS then
sends this self-employment information to SSA. SSA uses the SSN to
record employees' earnings.
Accurate earnings information is vitally important to our Agency's
administration of the Social Security program because a worker's
earnings record is the basis for computing retirement, survivors and
disability benefits. If a worker's earnings are not properly recorded,
he or she may not qualify for Social Security benefits or the benefit
amount payable may be wrong.
Each year, SSA processes approximately 235 million W-2s from 6.6
million employers that are sent to the SSA either on electronic media
or on paper. Almost 150 million wage earners work in jobs covered by
Social Security, which means that many workers worked in more than one
job during a year. While some employers continue to send us their
reports on paper, we encourage electronic filing. We work with the
employer community to educate them on the advantages of this method and
expect its use to expand as technology improves. In fact, in FY 2005,
66 percent of W-2s were filed electronically, up from less than 10
percent in 1999. We believe the increase in electronic filing will
reduce errors over time.
SSA also offers a suite of services called Business Services Online
(BSO). BSO offers Internet services for businesses and employers who
exchange information with Social Security. Available services for
registered users include the ability to report W-2s via the internet.
As you know, SSA mails Social Security Statements to workers over
age 25 each year (approximately 143 million in 2005). The Statement is
a concise, easy-to-read personal record of the earnings on which the
worker has paid Social Security taxes during his or her working years
and a summary of the estimated benefits the individual and his/her
family may receive as a result of those earnings. We encourage workers
to review the Statement to ensure that the information in SSA's records
is correct and to contact SSA to make any corrections necessary.
Later in life, when a person files for benefits, an SSA employee
reviews the earnings record with the worker and assists the worker to
establish any earnings that are not shown or are not correctly posted.
However, since it may be difficult for the worker to accurately recall
past earnings or to obtain evidence of them, SSA strives to maintain
accurate records at the time the wages are reported.
The Earnings Suspense File
The Earnings Suspense File, or simply suspense file, is an
electronic holding file for wage items reported on Forms W-2s that
cannot be matched to the earnings records of individual workers. A
mismatch occurs when SSA cannot match the name and SSN on the W-2s
submitted to information in SSA's records. If SSA later resolves the
mismatch, we can remove the item from the suspense file and credit the
wages to that person's record.
Since the beginning of the program in 1936 and through Tax Year
(TY) 2003, the most recent year for which data is available, the
suspense file contained about 255 million W-2s. While the suspense file
represents an accounting of unassociated wage items, the taxes on these
wages have been paid into to the trust funds. In TY 2003, $7.2 billion
in payroll taxes were credited to the Trust Funds based on wage items
placed in the suspense file. This represented approximately 1.3 percent
of total payroll taxes credited to the Trust Funds.
In order for wages to be credited to the correct worker, the
worker's name and SSN on the W-2 must match the name and SSN recorded
on the master record of SSNs assigned, the ``Numident'' file. As I
discussed earlier, we receive about 235 million W-2 reports annually,
representing reports from 6.6 million employers that total about $4
trillion in reported wages.
Ten percent of the W-2s received by SSA have invalid name and SSN
combinations when they first come to us. In our initial processing, the
computer system uses more than twenty automated routines to identify
commonly occurring errors that, when corrected, enable the W-2 to be
properly posted.
A number of these processing routines address discrepancies between
the name reported on the W-2 and the name on SSA records. For example,
compound surnames which are hyphenated, such as ``Mary Smith--Jones,''
sometimes cause a ``no match.'' Others assume that the reported name is
correct but that some mistake has been made with the SSN. The reported
SSN is screened for a variety of prescribed common mistakes, such as
transposing digits, in an effort to obtain a match.
For TY 2003, using computer routines we were able to post more than
half of all W-2s received with invalid name/SSN combinations to the
correct SSN. The balance, 4.1 percent of total W-2s received for TY
2003, was initially recorded in the suspense file. As of October, 2005,
approximately 8.8 million W-2s (3.7 percent of the total) representing
$57.8 billion in wages remained in the suspense file for TY 2003.
Subsequent processing reduces this amount further. SSA removes wage
items from the suspense file on an ongoing basis and posts them to the
correct worker's record. Reinstatements can occur when a worker
provides evidence of missing wages after reviewing the Security
Statement. Over time, the percentage of W-2s for a given year or period
of years that remain in the suspense file declines as a result of this
subsequent processing. Historically, approximately 2 percent of all
wage items for a given year remain in the suspense file.
Removing W-2 Items from the Suspense File
SSA is dedicated to reducing the suspense file's rate of growth as
well as to reducing its current size. We want to make sure that
individuals receive full credit for their earnings and the correct
benefit amount when the time comes. As part of this effort, SSA
employees carry out a number of activities in addition to our SSN
verification services, which we have described earlier, to assure that
the correct earnings are credited to correct individuals' records.
For example, SSA sends a letter, called the ``No Match'' letter, to
employers who submitted a significant number of Forms W-2 that could
not be matched to an individual's earnings record. The intent of these
``No Match'' letters is to improve the accuracy of wage reporting and
the accuracy of Social Security benefits payable to eligible wage
earners and their families. SSA also requests the employer to submit
corrected W-2s so that future reports will be accurate.
In 2005, SSA sent 127,652 of these letters to employers who
submitted wage reports containing a number of Form W-2s that SSA could
not process.
SSA also notifies employees when we cannot process their W-2s due
to mismatches and asks them to work with us to resolve the problem. In
2005, we sent 9.6 million such letters to employees, of which 1.5
million were sent to employers because we did not have addresses for
the employee.
Beginning in April 2003, SSA implemented a new process that will
electronically find millions of additional matches of W-2s in the
suspense file and post those W-2s to the earnings records of the
correct individuals. SSA's previous processes to match the name and SSN
used only the Numident. The new process also uses the worker's detailed
earnings record, which includes employer information and the master
beneficiary record for those who are receiving benefits, to credit the
missing earnings to the correct worker. This new process also employs
additional techniques with earnings record patterns to match the
earnings to the correct individual.
As a result of this new process, we have removed more than 11
million W-2s from the suspense file and posted them to the correct
earnings records. It is estimated that a total of 30 million items will
be removed from the suspense file and credited to the records of
individual workers through these new efforts.
Despite all these efforts, over time the suspense file continues to
grow. SSA's Inspector General will testify later that this growth is
due to ``unauthorized work by non-citizens'' and that stronger worksite
enforcement is needed.
This growth points to the larger issue of the increase in illegal
immigration and subsequent illegal employment. To address the security
risks from illegal entry into the U.S. as well as current challenges
concerning legal immigration, President Bush has called for a three
part comprehensive reform of our immigration system to:
1. ``Secure the border by catching those who enter illegally, and
hardening the border to prevent illegal crossings.''
2. ``Strengthen enforcement of our immigration laws within our
country.''
3. ``Create a temporary worker program that will take pressure off
the border, bring workers from out of the shadows and reject amnesty.''
Partnership With Other Agencies
As I mentioned earlier, our ability to improve our employer wage
reporting process depends partially on our relationships with the DHS
and the IRS. I want to highlight several efforts that we have
undertaken with our federal partners to strengthen the integrity of the
SSN and improve the wage reporting process.
For example, we are working with DHS, pursuant to the Intelligence
Reform and Terrorism Prevention Act, on an interagency task force for
the purpose of improving the security of Social Security cards and
numbers. The task force will establish additional security
requirements, including standards for safeguarding cards from
counterfeiting, tampering, alteration, and theft; verifying documents
submitted for the issuance of replacement cards; and increasing
enforcement against the fraudulent use or issuance of Social Security
numbers and cards.
The Enumeration-at-Entry process is a joint effort with DHS and the
Department of State (DOS). DHS and DOS collect enumeration data as part
of the immigration process and give it to SSA for use in enumerating
aliens. This effort to strengthen the integrity of the SSN and improve
government efficiency began in October 2002.
Our efforts to collaterally verify documents with the issuing
agencies significantly improve the integrity of the SSN. SSA works
closely with DHS to verify all immigration documents submitted in
support of an application for an SSN and with DOS to verify the
documents of refugees. We work with the Department of Justice to verify
the documents of some individuals granted asylum.
As I mentioned earlier, we also support DHS in its ongoing
initiative known as the Basic Pilot. The Basic Pilot is a voluntary
tool used by participating employers to confirm the employment
eligibility of newly hired employees.
As of February 14, 2006, DHS and SSA have signed agreements with
over 5000 employers, representing about 22,500employer sites. This
represents more than a 50 percent increasesince the expansion of the
Basic Pilot to employers in all States. On the date of expansion
(December 20, 2004), there were 2924 participating employers. In FY
2005, SSA handled over 980,000 Basic Pilot queries. The Basic Pilot
allows an employer to confirm the validity of a SSN and whether a
person is authorized to work on the front end of the relationship
rather than after a W-2 has been filed.
In addition to these initiatives, SSA participates with DHS in an
executive level steering committee to oversee and direct cooperative
activities. This committee was formed in 2003. At its last meeting, the
committee addressed a number of initiatives to strengthen the processes
used to assign social security numbers.
These meetings have stimulated a high level of staff-to-staff
contacts that occur informally nearly every day. Also, over the past
year, the two agencies have engaged in a number of informal cooperative
efforts such as workgroups to address specific requirements of joint
interest, such as provisions of the Intelligence Reform and Terrorism
Prevention Act and the Real ID Act.
We have also established an interagency effort with IRS and are
working to resolve issues and cooperate on efforts that cross agency
lines. We meet as necessary to address issues as they come up. Recent
discussions have focused on developing automated systems to support the
employer community in the reporting of wages and related matters.
Each year, SSA hosts the National Payroll Reporting Forum. IRS
routinely participates in this training endeavor, which focuses on the
latest changes for the upcoming tax season, how to file electronically,
SSNVS, etc. Representatives from businesses, payroll providers, and
other groups attend. The 2006 forum is scheduled for late May.
I would like to discuss the Agency's role in identifying and
reporting fraudulent activities related to the Social Security program.
The employees in our local offices are instructed to be alert for
reports of fraudulent activities. When such activities come to their
attention, they document the problem and refer the matter to the
Agency's Inspector General. Staff in the local IG office investigate
the matter further. They then present violations to the local U.S.
Attorney, who decides whether to bring charges. To facilitate the
process, the Agency has assigned staff attorneys from the Agency's
Office of General Counsel to assist US Attorneys in prosecuting
violations related to the Social Security Act.
Because of the interdependence of Federal governmental functions,
it is critically important that Federal agencies work together to
effectively combat identity theft. SSA currently cooperates with many
agencies, including the Internal Revenue Service, the Departments of
Justice, Homeland Security, State, Health and Human Services,
Education, and Treasury, and the Federal Trade Commission. We share and
verify information with these agencies, and we work together to improve
the interfaces between our business processes. We are working with many
agencies in an Interagency Identity Theft Working Group to broaden and
strengthen the cooperation among Federal agencies. The Working Group is
developing a summary of Federal agencies' activities to combat identity
theft. It will facilitate sharing of best practices and expertise and
will result in the development of new approaches to combat identity
theft and solutions to common challenges.
Conclusion
I would like to conclude by emphasizing our commitment to
strengthening our wage reporting processes to help ensure the accuracy
of the earnings records that we maintain for all workers. We continue
to explore ways to improve the accuracy of our earnings report records
and to limit the growth of the suspense file. We believe our efforts
help to ensure that we remain good stewards of the Trust Funds.
I want to thank you, Chairman McCrery, Chairman Ramstad, and
members of both Subcommittees for inviting me here today. I look
forward to working with you to continue to improve SSA's processes. I
will be happy to answer any questions you might have.
Chairman MCCRERY. Thank you. Mr. Baker.
STATEMENT OF THE HONORABLE STEWART A. BAKER, ASSISTANT
SECRETARY FOR POLICY, U.S. DEPARTMENT OF HOMELAND SECURITY
Mr. BAKER. Thank you, Chairman McCrery, Chairman Ramstad,
Ranking Members Levin and Lewis. It is a pleasure to be here. I
don't think I have testified here since the eighties, when I
was a private lawyer talking about the then new U.S.-Canada
Free Trade Agreements. It is great to be back. I would like to
talk--begin by talking about the border, our Southwest border.
I think we have all been shocked by the amount of violence that
we have seen there recently. Assaults--this is not just a
newspaper phenomenon--assaults on border patrol agents has
doubled in the last year. The reason we think that that has
happened is that as our border control efforts have gotten
stronger, we have begun to interfere with the livelihoods of
the people who make their living smuggling human beings across
the border, and they are fighting back.
We can continue and we will continue to strengthen border
controls, but that cannot ever be a complete solution to the
problem of border incursions. The reason that those coyotes are
making a living smuggling people across the border is because
once people get across the border, they can get a very good job
in the United States, with a driver's license and a fake SSN.
That is, in fact, what many people do.
Until we can address the problem that is drawing people
across that border, we will always have difficulties at the
border. We will always have people slipping across, and then we
will always have people living in our cities and our
countryside who are living outside the law, in the shadows,
afraid to talk to law enforcement, afraid to talk to the
authorities, afraid to complain when employers abuse them.
We shouldn't allow people to live in our country under
those conditions. We need to move them into a temporary worker
program where they can come out of the shadows, live in the
light, have a temporary job in the United States, go home with
a nest egg, and begin a life there.
They won't do that, however, until we can persuade people
that it is not easy to get a job in the United States just by
making up a SSN. That is why we are here today. We believe that
false SSNs are a major part of the immigration fraud that
enables people to work illegally in the United States, we are
very eager to get access to information that SSA has about
people whose names and birth dates do not match their SSNs.
The SSA identifies 8, 9 million people in that state every
year. The SSA does an enormous amount of work to try to clear
up those mismatches, because it is in the interest of the
individual to clear that up so that they can actually get their
benefits. Yet, a very small percentage of people actually clear
that up, which suggests that for many of them it is not
possible to clear it up because they have used a false SSN to
get their job. We think that it could be as high as 90 or 95
percent of those mismatches are people who have made up their
SSNs. That is based on our experience with the basic pilot
initiative.
Chairman Ramstad asked are we satisfied with the amount of
data sharing today, and while we have got very good cooperative
relationships with the IRS and with SSA, we are not fully
satisfied because current law, section 6103, makes it very
difficult to share all of the information that we would like to
have about the mismatches and other aspects of Social Security
fraud that may also indicate immigration fraud.
The kinds of things that we could do with that information,
according to the General Accounting Office, there are dozens of
employers who have used the same SSN for a hundred employees or
more. That suggests that this is not just employees who are
part of the problem, but employers, some employers, of very
limited number, but they should be at the top of our list for
enforcement calls. We don't know who they are. We can't know
who they are under the current interpretations of the law that
SSA and IRS have, and until there is a cure to that, I think
that we will not be able to target employers who are probably
part of the problem. We will not be able to do a completely
effective job of identifying people who may be engaged in
immigration fraud who are working in chemical plants, where
sabotage or even a mistake could kill thousands of Americans,
or working in the baggage handling area of airports; working in
nuclear power plants.
Again, we would like to be able to target our enforcement
in the places where the problems are to be able to identify
people, employers, and workers who ought to be at the top of
our list for enforcement. I recognize that there are legitimate
privacy and revenue collection concerns at stake here, but we
face unprecedented levels of immigration as well, illegal
immigration. We have got to gain control of our borders or some
day terrorists will use exactly the same kind of coyote service
that economic migrants are using to get across that border. The
only way to get control of that border is to get control of
workplace hiring so that it is not as easy as it is today to
get a job illegally. Having access to some of the information
SSA has today would move us a long way down that road. Thank
you very much.
[The prepared statement of Mr. Baker follows:]
Statement of The Honorable Stewart A. Baker, Assistant Secretary for
Policy, U.S. Department of Homeland Security
INTRODUCTION
Chairman McCrery, Chairman Ramstad, Ranking Members Levin and
Lewis, and Members of the Subcommittees on Oversight and Social
Security: I would like to thank you for the opportunity to appear
before you today as you examine the current employment eligibility
verification process, specifically the mismatching of Social Security
Numbers (SSNs). I appreciate the Subcommittees' decision to devote
attention to this issue because mismatching can be an indication of a
significant problem, namely the use of fraudulent SSNs by unauthorized
workers. If left unaddressed, this problem risks undermining the
Administration's efforts to stop illegal immigration.
In my testimony, I would like to focus on one potential--and
promising--way of dealing with this problem that the Subcommittees have
already identified. I speak about improved cooperation between the
Social Security Administration (SSA) and the Department of Homeland
Security (DHS) to detect and prevent violations of immigration law.
BACKGROUND
As the Members of the Subcommittees know, the border with Mexico is
an increasingly violent place. In part, that is because our efforts to
restrict illegal crossings are beginning to work. Criminal gangs who
traffic in drugs or human beings make their profits by illegal
crossings, and as DHS border enforcement grows, it is not surprising
that attacks on the Border Patrol have increased.
The best way to reduce the attacks--and the illegal trade in human
beings--is to reduce the incentives to cross the border illegally in
the first place. For one thing, that means relieving pressure on the
border by creating a temporary work program that provides a legal
channel for honest workers and employers to support their families and
our economy without violating our laws. For another, it means reducing
the ability of illegal immigrants to find easy employment in the United
States. As Secretary Chertoff stated in his testimony before the Senate
Judiciary Committee on October 18, 2005, a tough interior enforcement
strategy is one of the three pillars of the President's strategy for
comprehensive immigration reform, along with securing the border and
creating a temporary worker program.
A vigorous enforcement of our worksite immigration laws is a
crucial step in moving towards a system where foreign migrant workers
are employed in this country legally and transparently. Currently,
people who enter the United States illegally to find employment live in
the shadows of our society, enjoying no legal protection in the
workplace. The Temporary Worker Program, which the President proposed,
will create instead a system where foreign workers necessary for our
economy can work here legally and without fear. But both employers and
employees will be slow to move toward such a transparent and open
system unless they know that we are determined to enforce forcefully
and faithfully our immigration laws in the workplace. For the Temporary
Worker Program to be successful, we need to foster a culture of
compliance with the law among both employers and workers, and we need
to have the necessary tools to do so.
The DHS task of effectively enforcing laws that prohibit the
employment of illegal immigrants depends on the Department's ability to
obtain and use information indicating potential violations of
immigration laws. I therefore encourage the Subcommittees to consider
two questions: first, whether the information already collected by SSA
suggests a significant problem with our existing enforcement of
immigration laws; and, second, whether providing such information to
DHS would improve such enforcement.
SSN MISMATCHING INDICATES WIDESPREAD EVASION OF IMMIGRATION LAWS
With respect to the first question, the answer seems quite clear.
Studies conducted by both the SSA Inspector General and the Government
Accountability Office (GAO) have documented that a significant
percentage of the SSNs listed on earnings reports filed by employers
(commonly known as Forms W-2) result in a ``no-match'' against the
master system of SSNs kept by SSA. As the GAO report submitted on
February 4, 2005 indicated, approximately 10 percent of the SSNs listed
on earning reports submitted by employers to SSA initially do not match
SSA's records. Even after SSA applies a range of validation measures to
reconcile the existing ``no-matches,'' still about 4 percent of the
earnings reports remain unattributed to valid SSNs. This number amounts
to almost 9 million reports per year, representing $57.8 billion in
earnings for Tax Year 2003. These remaining unreconciled reports are
then placed in the Earnings Suspense File (ESF).
SSA then employs additional measures to reconcile these earning
reports. As a part of these efforts, SSA notifies employers with a
significant number of mismatches, requesting that these employers
correct the filed earning reports. SSA also sends similar ``no-match''
letters to employees, whose earning reports could not be processed
because of the mismatch, asking them likewise to correct the error. The
number of these ``no-match'' letters is considerable. The SSA's
Inspector General indicated in his September 2002 testimony before the
Subcommittee on Social Security that earlier that year SSA sent out
about 800,000 of such letters to employers and some 7 million letters
to employees. Testifying before the Subcommittee on Oversight in March
2004, Deputy Commissioner Lockhart indicated that the number of ``no-
match'' notices sent the following year, in 2003, was targeted at
larger employers: That year, SSA mailed out over 125,000 such notices
to employers covering 9.5 million employees. In many instances, where
SSA does not have a valid address for an employee, the employee-
directed notice is sent to the employer.
These discrepancies are quite easy to correct. All an employer or
an employee must do is inform SSA of the correct SSN to which the
earnings should be attributed. If the earnings are legitimate, it is in
the interests of the worker to ensure that the record is accurate,
because a worker's future retirement and disability benefits depend
upon SSA's record of his wages. If some of the worker's wages are not
recorded, that may imperil his ability to get benefits in the future,
or may limit the amount of those benefits.
Despite all of these incentives, the manifest reality is that very
few employers or employees respond to the ``no-match'' letters. Some of
this may be explained by confusion about what to do, resulting in
employers simply not doing anything. Still, given the fact that simple
errors can be corrected easily by both the employer and the employee,
the extremely low return rate signals that an overwhelming percentage
of the ``no-match'' instances cannot be explained by legitimate
discrepancies and, as the GAO's February 2005 report indicated,
suggests an attempt to obtain unauthorized employment through means of
fraudulent SSNs.
There may, of course, be some innocent explanations for the
discrepancies. For instance, a mismatch can result from a misspelling
in the employee's name, from a change of name after marriage or for
other reasons, from a failure to match correctly the record of an
employee with a compound last name, or from confusion between the
worker's last and first names. Notably, however, all of these mistakes
are easy to correct, yet the stark reality is that, despite all
incentives to do so, only a very small percentage of workers take the
necessary action to rectify them.
A similar situation can be seen with respect to ``no-matches'' that
result because the SSN listed on the earning report is composed solely
of zeroes. Some of the SSNs that use all zeros result from instructions
issued to employers who file their earning reports electronically to
use all zeros in the SSN field when they do not have a number for their
worker. Such a mismatch is, again, easy to correct. Yet, as I just
discussed, very few employers or employees take the necessary action to
do so.
The persistent failure of an overwhelming percentage of both
employers and employees who receive the ``no-match'' letter from SSA to
correct the reported error strongly suggests that an innocent
explanation cannot account for all of the mismatches. The evidence
indicates that there is likely an entrenched and widespread practice of
using fraudulent SSNs to evade compliance with immigration laws. As the
SSA's Inspector General acknowledged in his September 2002 testimony
before the Subcommittee on Social Security, illegal immigrants account
for a significant portion of items in the ESF. The GAO report,
completed in February of last year, suggests that the problem has only
increased in magnitude in the subsequent years.
USE OF SSA'S ``NO-MATCH'' DATA IN THE ENFORCEMENT OF IMMIGRATION LAWS
DHS sees a clear benefit to receiving portions of the ``no-match''
data from SSA in assisting with the Department's mission to enforce
immigration laws at the workplace. As I already stated, the SSA is
using a variety of innovative and sophisticated methods to identify the
SSNs to which the unreconciled earning reports should be attributed
before sending our the ``no-match'' letters with respect to the
remaining reports. The database of ``no-match'' letters, therefore, is
already targeted to those unattributed earning reports that cannot be
explained by, say, a simple misspelling in the employee's name or a
typographical error in his SSN. These true ``no-match'' letters could
aid an U.S. Immigration and Customs Enforcement investigation of an
employer violating immigration laws. However, due to statutory
restrictions, DHS is currently not permitted access to the ``no-match''
data.
The GAO report reveals precisely the kind of data that, if made
available to DHS, would trigger instant attention from our immigration
enforcers. For example, GAO cited many examples where employers used
the same SSN for as many as 10 different workers in the same tax year,
and did so as many as 308 times over a 16-year period studied.
Astonishingly, GAO discovered over a hundred occurrences where
employers used the same SSN for more than a 100 earnings reports, and
even an instance where the same employer used one SSN for 2,580
different earnings reports in a single tax year. Obtaining information
about potential immigration violators will allow the immigration
components of DHS to target its enforcement efforts at such employers--
those with the worst record of submitting compliant SSNs for their
employees
Here, I would direct the Subcommittees' attention to the GAO
finding that, during the period from 1985 to 2000, a relatively small
percentage of employers--only about 0.2 percent--were responsible for
over 30 percent of the total number of ESF reports. Moreover, the types
of employers most frequently associated with incorrect earnings reports
belonged to industry groups historically known to employ illegal
immigrants, such as agriculture, food and beverage industry, and
construction and other trade services. The SSA Inspector General has
similarly found that employers in these industries are most likely to
file earning reports with incorrect information. Given this
correlation, some portions of the ``no-match'' data would assist the
Department with its enforcement energies.
On the basis of the ``no-match'' letters, the Department could
easily identify those employers that have either a large or a
disproportionate number of employees without a matching SSN. The
Department could then concentrate its efforts on these employers,
asking them to indicate whether their employees have corrected the
inaccurate records, or to explain what steps the employers have taken
to clear up the ``no-match'' reports, or to provide some other
satisfactory explanation for the discrepancies.
We are aware that the vast majority of employers do wish to comply
with the rules, and we are committed to working with those employers to
clarify their responsibilities to attempt to resolve ``no-match''
letters. Working together would help to ensure that all employers take
necessary action to correct circumstances that would lead a reasonable
person to believe that the worker is undocumented, and would further
eliminate the ability of illegal immigrants to obtain employment.
Eliminating the use of phony numbers will go a long way toward
preventing more common immigration violations. But immigration
violators will look for other ways to beat the system. Instead of phony
names or numbers, they will use real ones. Adults may use the numbers
of infants, or a group of workers may share a single valid name and
number. These frauds, too, can be discouraged by a careful review of
SSA data, but not by a single-minded focus on ``no-match'' letters.
That is why DHS would like to further establish a good data-sharing
relationship with SSA, not a single-shot approach that deals only with
today's most obvious problem.
I want to stress that all of the parties here today, including DHS,
are committed to preserving the privacy of sensitive data. The
information DHS seeks is the identities and contact information of
employers and employees whose behavior requires further examination. We
understand that this is sensitive data, and we will ensure the
appropriate privacy protections are in place to protect U.S. citizens
from potential abuse.
I also want to acknowledge that the current prohibition on sharing
of the information collected from earning statements reflects a
legitimate concern about the need to ensure effective tax collection.
This is an important interest, and it should, of course, be carefully
considered as we think about the ways to enhance data-sharing between
SSA and DHS. But we also need to consider carefully the significant
interest that we have in ensuring effective enforcement of our worksite
immigration laws and fostering a culture of compliance among both
employers and employees.
CONCLUSION
I thank Members of the Subcommittees for the opportunity to address
them today on this important issue, and I stand ready to answer any
questions.
Chairman MCCRERY. Mr. Baker, this may not be in our
Committee's jurisdiction, but has your Department proposed any
specific language to change section 6103 of the Internal
Revenue Code, which would allow greater sharing of information?
Mr. BAKER. There is no formal proposal today as I speak,
but we are certainly working with the rest of the
Administration on ideas about how to solve that problem.
Chairman MCCRERY. Should we expect some offering from the
Administration relatively soon with respect to this problem?
Mr. BAKER. I certainly hope so.
Chairman MCCRERY. Is there disagreement among the agencies
in the executive branch about how to solve this sharing
problem?
Mr. BAKER. I think we all recognize the importance of the
immigration problem and the value that this information could
provide. We also recognize that there are privacy and revenue
consequences to making this decision, so it has been a very
collegial discussion thus far.
Chairman MCCRERY. Good.
Mr. EVERSON. Could I comment on that, sir?
Chairman MCCRERY. Sure.
Mr. EVERSON. I agree exactly with Secretary Baker's
characterization of the discussions that have been held. I just
do want to emphasize that in terms of tax administration, I
view this as an important discussion, because of the fact that
we have made progress in having people who are in the country
illegally and working illegally pay their taxes. That is my
principal concern as a tax administrator.
There is, on the other hand, a very important concern,
which was very eloquently laid out by the Secretary, about
having a legal system of immigration. I don't understate,
though, the impact of this on tax administration, should we
share the information. It is a very important policy choice
that is how I would phrase it.
Chairman MCCRERY. In other words, you are saying that were
we to loosen the current rules with regard to sharing
information, lest we do it very carefully, it could result in
lower compliance from a tax standpoint? Is that what you are
saying?
Mr. EVERSON. I think that I would be even a little sharper
on that----
Chairman MCCRERY. It may be.
Mr. EVERSON. --to say that right now, as an example, we
process 2 million returns a year in our volunteer sites around
the country. These are community-based organizations largely
working with immigrant groups. There will certainly be a
chilling effect on participation in the tax system if those
volunteers say, ``Look, this information will now be
transmitted to Homeland.'' I am not saying don't do that.
Please get me right on this. I am just saying if we do this, we
all have to do it together with our eyes wide open.
Chairman MCCRERY. That is why I asked the question about
whether all the agencies are cooperating on this, and if there
was squabbling among the agencies and the executive branch
about how to solve this. I probably should have put it more
positively like you did and said you should all work together
to make sure that we go in with our eyes wide open and try to
avert any unforeseen or unintended consequences, I should say,
of our changes. Mr. Baker, you speak with some enthusiasm about
getting to this problem and solving this problem. Yet, worksite
enforcement arrests by DHS have declined, as well as notices of
intent to fine employers. Do you have reasons for this and will
your enthusiasm perhaps spread to the rest of the Agency to
correct this decline?
Mr. BAKER. I hope so. I am new to the area and maybe that
is why I speak with such enthusiasm. Yes, there is no doubt
that there have been difficulties mounting effective worksite
enforcement programs. In many cases, that is because of the low
fines and the very substantial administrative law judge
procedures that have been necessary to follow and difficulty
actually collecting the fines once they have been imposed. Even
people who have a pattern and practice of violation, the people
who are the worst violators, I think the fine is $10,000. It is
a cost of doing business for the worst employers.
We do have to have a coherent, comprehensive approach to
worksite enforcement that addresses those issues as well, but
as we have begun to work on border enforcement, we have seen
time and again that we have got to do interior enforcement at
the same time and also have a temporary worker program for the
people who will be displaced by our enforcement efforts.
Chairman MCCRERY. On another matter that could help you do
your job, some time ago, Congress required SSA to provide what
was then some other agency, but is now under the DHS, a data
file called the Non-Work Alien File. The DHS basically says
this file is so messed up it is unusable. We can't use it. It
is not good data. What did DHS do to reach that conclusion, and
why do you think you cannot use the information for immigration
enforcement purposes?
Mr. BAKER. I am not prepared to say we can't use it, but
there were a number of challenges there. We can start with the
fact that SSA, of course, has an SSN. The DHS ordinarily does
not have a SSN in its records, because most of the time when we
encounter an alien, even if we are going to be authorizing him
to work, he may not have an SSN. Our files are not matched up.
When we get the information from SSA, our experience is about
half of the people we can't tell who they are. We can't match
our records and theirs.
In addition, SSA data, when it comes to us is pretty far
out of date. It is about a year, a year and half out of date.
It is not their fault, because they get the information late,
but that means that people have moved on. That makes it
difficult to find people.
Plus in that year and a half or perhaps even earlier, a
number of people who originally get a non-work SSN, they are
here. They may marry a U.S. citizen. They become authorized to
work by virtue of a change in their status. We find that about
40 percent of the people on that list actually are legally
entitled to work. They just are using an old SSN.
That made it--meant the data was not great for doing
enforcement. There were other problems. We don't have any
mainframes at DHS, but SSA works off big mainframe computers
with big tapes and they--for years they sent over what they
had, which was their tape, and we didn't what to do with it.
A lot of these problems have begun to recede. We are
getting the information on a disk in Excel spreadsheet form,
which we can manipulate, and we are expecting a new batch of
data in the next couple of weeks.
Our analysis of the most recent Excel spreadsheet data that
we got is that there are things that we can do with it. Even
though not everybody on there is unauthorized to work, the fact
is that probably 60 percent of them are not authorized and yet
they are making contributions.
So, we have begun to do analysis of well who are the
employers who have the largest number of non-work aliens
working for them. Many of them will be authorized, but many of
them will not be. So you begin to wonder whether some of these
employers ought to be the first to get the visit from DHS.
When we get the new data in a week or two, we hope to do a
more sophisticated analysis of that information and begin to
use it in prioritizing our investigations.
Chairman MCCRERY. Thank you. Perhaps when you forward to
the legislative branch your recommendations for changes in the
law to facilitate sharing of information, you could also tell
us whether this particular exercise is still worth it, and if
it's not, we will junk it. If so, perhaps you can explain how
we might make it better between the two Agencies--SSA and DHS?
Mr. BAKER. We will gladly do that.
Chairman MCCRERY. Mr. Levin?
Mr. LEVIN. Thank you. Thank you, Mr. Chairman. Let me
follow up with your salient questions. First ask you, Mr.
Baker, you mentioned some of the problems with the present laws
and regulations relating to employer responsibilities. Has DHS
or its predecessors suggested amendments to the laws that would
make it easier to enforce employer obligations?
Mr. BAKER. This is part of the review that we are going
through right now. As you know, there is legislation that has
passed the--some legislation on immigration reform has passed
the House, and there is a companion bill in the Senate being
marked I think in early March. We are as an Administration
looking for a way to engage in that process so that we can make
suggestions for ways to improve worksite enforcement. That is
an ongoing discussion inside the Administration, which I hope
will result in action fairly soon.
Mr. LEVIN. You favor tightening the requirements in the
enforceability of the employer obligations?
Mr. BAKER. I certainly believe that if we do not deal with
the fact that it is so easy to get a job in the United States,
with a minimum of fake documents that can be purchased for $50
bucks out in Adams Morgan today, that if we don't solve that
problem, we won't solve the border problem.
Mr. LEVIN. I understand that.
Mr. BAKER. We won't solve the illegals.
Mr. LEVIN. Your position is there should be a tightening of
the requirements of the employer?
Mr. BAKER. I think the employer will have to take more
responsibility for making sure that his employees are actually
authorized to work in the United States, and we need to find a
way to give employers tools to do that.
Mr. LEVIN. When you say tools, right now you think the main
problem is that when employers hire people who are not legally
here, that it is the lack of tools that leads them to hiring
these people?
Mr. BAKER. I think, in fact, that is in many cases.
Mr. LEVIN. You think that is the main problem?
Mr. BAKER. Yes. In many cases, employers are--have no
interest in hiring illegal employees. They have a set of
procedures that they follow that are required by current law,
but which are not adequate to actually screen out illegal
immigrants. I have had businesses complain about the large
number of identification documents that they are required to
accept as proof of identity.
In some cases, employers have said you have made it too
easy for people to engage in fraud.
Mr. LEVIN. All right. It will be interesting to pursue
that. Let me--you talk about the data being a year, 2 years
old. The data that you are suggesting be obtained from SSA and
IRS would remain that old, would it not?
Mr. BAKER. It would. It would always be at least a year out
of date.
Mr. LEVIN. When you say the reason you haven't used the
data you now have is because it is too old. What does that mean
for your request or your suggestion that you receive more old
data?
Mr. BAKER. Well, that was one of five significant problems.
I left out one. One of the other problems was that I think the
data included everybody who had ever worked since this program
began in the seventies, even if they hadn't worked in 20 years.
What we are interested, of course, in receiving is data about
people who were working last year. It will not be perfect,
because of the lag, but we still believe that we can use it to
find information that will allow us to prioritize our
enforcement efforts.
Mr. LEVIN. I think my time has expired. Let me just
mention--you mentioned about the differences among the agencies
and the Commissioner, IRS Commissioner, responded. I think you
would agree that there are some competing, at least if not
competing, different considerations here.
Mr. EVERSON. Absolutely.
Mr. LEVIN. I don't think we should characterize this
discussion of competing interests or needs as kind of--I don't
think any of us want to minimize them or suggest that it is not
important for you to have a full-scale intelligent discussion
of how you mesh competing interests, competing needs; that the
potential problem of there being less information received by
IRS if you were to dispose more information to other agencies,
not that that is the answer, but I think we need to be careful
to not be--not to--to minimize the importance of this kind of a
intelligent interagency discussion, which I hope you will share
with us at some point, when it is appropriate. Thank you.
Chairman MCCRERY: No, it is an excellent point, Mr. Levin.
Chairman Ramstad.
Chairman RAMSTAD. Thank you, Mr. Chairman. Commissioner
Everson, I just want to clarify a point. I know the IRS has the
authority to impose penalties on employers who fail to file the
correct wage information of their employees. Hasn't the IRS
been imposing penalties and collecting money from employers who
repeatedly submit mismatched W-2s?
Mr. EVERSON. Not in any meaningful sense I would say, sir.
What really happens here is that those penalties are very hard
to sustain. It is not unlike what Secretary Baker was just
talking about in terms of the hurdles you have to go through.
The basic dilemma here is that the employer has to have
accurate records, but it is the employee who is on the hook for
providing the accurate information to the employer. If the
employer has made a reasonable effort, then those penalties are
going to be abated.
The second point I would make here involves looking at what
we are trying to address, and you are, the $345 billion a year.
In the employment tax area, that is about $60 billion a year.
We have something like 2,500 frontline auditors and collection
officers who work on that piece of our business. This is also,
I would say, not a very profitable corner of our world--to
chase after those penalties.
That having been said, the final thing I would say is that
we have launched a study of some 300 employers who have a
particularly egregious record here. Three-quarters of their
employees seem to have mismatches, and we have a number of
audits going on them on employment taxes generally. If there
are reasons to impose some of these penalties, we will
certainly do so. I don't want to mislead you to say that it
would make sense from a tax administration point of view to
suddenly ramp this up just to help Secretary Baker.
Chairman RAMSTAD. Well, just to follow up on Secretary
Baker's point made during his testimony. As I understand it, if
that scenario unfolded of an employer hiring a hundred
employees on the same day and all hundred employees submit
signed W-4s using the same SSN, it seems to me it would be
obvious to any employer that he or she was receiving inaccurate
information. As I understand the situation, under IRS
regulations, the employer could not be held responsible for
submitting inaccurate information to the IRS? Is that correct?
Shouldn't the IRS have the ability to penalize employers for
this kind of conduct?
Mr. EVERSON. I think we have the ability, sir. It is a
question of what procedures they took and then what the
employees would have presented to them. I think that example is
obviously a rather extreme instance, which why we have
concluded the study that we are working on--to see what we can
do in these most extreme cases. We are following up on that
basket of the 300. I think it is with 297 that we have seen
that kind of a conduct.
I am hopeful that we will sustain some penalties in that
area. Again, I don't think that is--I don't--I would agree with
Secretary Baker's characterization of this. That is at the
fringe. That is not going to change the immigration problem in
terms of interior enforcement.
What he seeks to do, which I understand the benefit of and
think is important, is to have a system potentially that would
check everybody and then not to follow--if that fellow is
trying to break the law, the status, or the behavior that you
are talking about, that is one thing. The vast bulk of this is
people who have been duped by false documents let us say.
Chairman RAMSTAD. Well, so pursuant to that study, it is
conceivable that you would recommend changing the IRS
regulations so it could take action against employers who
knowingly submit false information?
Mr. EVERSON. Yes, sir. I think it would----
Chairman RAMSTAD. You and or SSA?
Mr. EVERSON. We have been encouraged to do that. This is a
tricky area, again, because this is reasonable cause area, but
I think we will learn something very real from the work we are
doing.
Chairman RAMSTAD. When do you expect the results of that
and when can we learn about them?
Mr. EVERSON. Assuming you don't do another hearing on this
for a year, I think we will know quite a bit by then. I don't
know where we are on each and every one of those audits.
Chairman RAMSTAD. My time has expired. Let me just make a
comment: I understand the tax gap, and I think you are doing an
excellent job overall, Commissioner. I understand the tax gap,
but I also understand the billions and billions of dollars that
the American people are spending that we are appropriating for
DHS and border patrol, and I think closer cooperation, and more
stringent enforcement are appropriate.
Yes, we might risk loosing millions of dollars of tax
revenues, but when you look at the number one function of the
Federal Government, to keep people safe and now to keep people
safe from terrorists, it doesn't take a genius to figure out
how to get into this country illegally and do us harm. God
knows how many al Qaeda sleeper cells are amongst us. We don't
know, nor does the CIA or the FBI.
I would just like to make that point. I am sure you don't
disagree and I am sure no Member of this panel disagrees.
Mr. EVERSON. Yes, sir, if I--could I respond?
Chairman RAMSTAD. Please.
Mr. EVERSON. I agree with that entirely. I would also note
that the kind of discussion we are having today about the
routine sharing of information for this purpose, important as
that policy objective would be, does not run to the issue of
terrorism. It is my understanding that in the context of the
Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism (U.S.A.
Patriot) Act of 2001 (P.L. 107-56), there was discussion about
having more sharing of taxpayer information for anti-terrorism
purposes, and that proposal was knocked down.
I would ask that we consider revisiting that issue. If we
are going to open up this issue for immigration purposes, I
would hope that we would look at 6103 for the potentially more
devastating terrorism issue. I would be surprised if Secretary
Baker is adverse to that.
Mr. BAKER. I would be delighted.
Chairman RAMSTAD. Well, again, Commissioner, I think you
make a very good point in conclusion and thank you again for
the job you are doing. I appreciate your responses.
Chairman MCCRERY. Mr. Lewis.
Mr. LEWIS OF GEORGIA. Thank you very much, Mr. Chairman.
Mr. Commissioner, there is a view in certain quarters, maybe in
Washington, maybe in some other places, that you and the IRS
have all of this information, just plenty of information on
unauthorized workers and that you are not sharing this
information with DHS. Is it your role to locate and identify
illegal or unauthorized workers and turn them into the DHS or
immigration officials?
Mr. EVERSON. No, sir, and I think that is the nub of this
issue. We run an independent database, and 6103 provides very
strict standards as to what can be shared. It does not allow
routine information to be shared at this stage through SSA over
to DHS. There is a written testimony that indicates last year
we issued approximately a million six I-10s. An I-10 is a
tracking number that we use for someone to file tax returns.
It used to be, the last time I was here, that we had a
bigger problem with aliens not filing because of concerns over
identity creation documents. Now, we have a better handle on
that. These documents are are being used for tax returns, but
an alien is encouraged through VITA site or elsewhere to come
in and file a tax return, and they are confident that their
information is not going across town to Homeland.
Mr. LEWIS OF GEORGIA. Thank you very much, Mr.
Commissioner.
Secretary Baker could tell the Members of the Committee how
do you reach a happy medium and not violate privacy when you
are asking DHS or asking IRS for information? I would like for
you to just elaborate. What are your feelings about people's
SSN the IRS information being put in a super, super agency made
available to DHS? I know we need to protect our country, but it
isn't something about violating the civil liberties, the civil
rights of people?
Mr. BAKER. I would be glad to address that. I completely
agree with you that privacy is part of our country's most
important values, and we need to protect that. The kinds of
information that we are asking for here, in this context, is
not tax return information, the kinds of information that
people are most concerned about the privacy of. This is
information, by and large, that says this person with this SSN
works for this employer, and that is really, in most cases, the
extent of the information that we are trying to get. That is
private tax information because it has been reported on a tax
form to the government, but there is nothing inherently related
to income tax about that information.
While it is necessary, I think after 6103 was passed, to
engage in a privacy discussion about any such information, we
are trying in our discussion of this to avoid intruding into
the most private aspects of people's tax returns.
Mr. LEWIS OF GEORGIA. Mr. Commissioner, as the former INS
Deputy Administrator, what are your views on?
Mr. EVERSON. I have to be careful here, sir, because I have
a current position in this Administration, but I do have some
experience in this area. These are two very important national
interests. I say frequently in speeches that we can't allow our
tax system to become broken the way our immigration laws and
our drug laws are where they are viewed as optional for people.
I couldn't agree more with the Secretary and with the
President, who has said we have to fix our immigration system.
If we do this, as this President and the Secretary have
said, we have to go forward with a very strong program which
gives people a legal vehicle to be here, but, on the other
hand, has a very strong interior enforcement program to make
sure if they're not here legally, they don't remain. I
implemented the '86 act--that was my job in the Reagan days. If
we fail to do that, and the '86 act didn't have the teeth in it
to do that, we really won't have helped Secretary Baker, and we
will make my job or my successor's job worse. If we are going
to go forward on this, we have to go all the way and do it
right with a liberal, if you will, employment program, but a
strict enforcement program on the interior.
Mr. LEWIS OF GEORGIA. Thank you very much. Thank you, Mr.
Chairman.
Chairman MCCRERY. Mr. Johnson.
Mr. JOHNSON OF TEXAS. Thank you, Mr. Chairman. Let me ask
the SSA guy one question. Have y'all stopped giving away cards
on phone calls?
Mr. LOCKHART. We don't give cards away on phone calls. To
get a new card, you have to come into the office and present
identification information and birth certificates or other
evidence.
Mr. JOHNSON OF TEXAS. Do you know of people getting more
than one?
Mr. LOCKHART. People can get replacement cards, if you mean
that. They can come in, but the law was changed last year, and
we are following the new rules.
Mr. JOHNSON OF TEXAS. No, I just wondered if you all were
enforcing the law?
Mr. LOCKHART. We are enforcing the law, and we are tracking
to make sure that no one gets more than 3 a year and 10 in a
lifetime.
Mr. JOHNSON OF TEXAS. Okay. Thank you very much. Mr. Baker,
I don't agree with you on anything you said. I would like to
know when you are going to stop the Catch and Release program,
because that is part of the problem on the border; and,
furthermore, how do you differentiate between other than
Hispanic and Hispanics that come across.
Mr. BAKER. I certainly agree with you that the Catch and
Release program----
Mr. JOHNSON OF TEXAS. When are you going to stop it?
Mr. BAKER. We are--the Secretary has said that we are
trying to stop it by the end of this fiscal year, which is in
October. The difficulty with the Catch and Release program--it
is not a program. Catch and Release arises with non-Mexican
illegal crossers of the border, whom we cannot simply return
across the border, as we do with Mexicans. We have to put them
in detention while we wait for them to have their identity and
nationality established, and then send them back to their home
country. That takes a long time, and it fills up an enormous
number of the detention beds that we have.
The difficulty, the way Catch and Release began was we ran
out of beds. We just didn't have any space for people. We had
to release them. What we are trying to do now is to make sure
we have enough beds, enough space, to put everyone who crosses
that border, who is not a Mexican, in detention and send them
home.
We are doing that today with Guatemalans, Hondurans,
Nicaraguans--most of the large numbers of immigrants who come
across that border illegally and who have begun to do it in
large numbers. There is still the biggest part of the season
for crossing that border is still to come, and it is going to
be a question whether we can continue to have the space to put
all of them and get them back to their home countries quickly
enough.
Mr. JOHNSON OF TEXAS. Well, you keep talking about other
than Mexican. Are you deporting the Mexicans?
Mr. BAKER. Yes, the Mexicans are taken back across the
border. When they are captured, they don't have to be detained.
They can be taken right back to the border.
Mr. JOHNSON OF TEXAS. What kind of law change do you need
to do the same with the others?
Mr. BAKER. The biggest problem we are facing today, the
largest numbers that we have not been able to get a handle on
are Salvadoran immigrants. The reason is that they cannot be
subject to expedited removal in the same way that other
nationalities can because of a lawsuit that was filed in the
eighties--the last time I was here before this Committee that
lawsuit was pending. We have an injunction against us, along
with several other injunctions that are that old that make it
very difficult to move them quickly through the process.
Mr. JOHNSON OF TEXAS. Well, if you don't have room for
them, do you let them get out and go to work? Do you give them
a green card?
Mr. BAKER. We have no choice but to let them go and in
general if they are--we essentially give them a court date and
say please show up for your court date.
Mr. JOHNSON OF TEXAS. Yes, sure, and they don't come.
Mr. BAKER. I entirely agree with you. This is not the right
way to run a system, but we do not always have the space for
them. We have asked for Congress to take a look at the
injunction process that affects immigration law so that some of
these immigration laws that are older than my kids can be taken
off the--the injunction can be taken off----
Mr. JOHNSON OF TEXAS. Okay. Well, I hope y'all will get
with it faster. Let me ask the IRS one question. According to
the Center for Immigration Studies, in 2004 you only--only
three employers were fined for hiring illegals--only three. I
think that is kind of unacceptable. Do you know--are y'all
trying to rectify that problem? I know you have discussed it a
little bit already.
Mr. EVERSON. Well, sir, I think that we want to do more
here, but again there is this conundrum where the employer has
to have accurate documents, but the burden is on the employee,
provide the documents to the employer, not vice versa, so you
have a reasonable cause exception here. We are looking at
whether we can tighten it up. These 300 audits or
investigations that we are doing will help us see this. The
real answer here, again, is not to have us enforce the
immigration laws since we are trying to go after the tax gap
and all those other things, but we are going to do what we can.
Mr. JOHNSON OF TEXAS. Thank you, sir. Thank you, Mr.
Chairman.
Chairman MCCRERY. Thank you, Mr. Johnson. Mr. Becerra.
Mr. BECERRA. Thank you, Mr. Chairman. Thank you to the
witnesses. Let me follow up on Mr. Johnson's questions, because
I think that is very important. Commissioner, is the IRS
capable of trying to detect employers who are violating our
immigration laws or those individual employees who may be
violating immigration laws without having to search for SSA
records as well as INS or immigration records?
Mr. EVERSON. Not to any meaningful extent, sir, given the
press of the tax gap and the other compliance areas. As I
indicated, I can't recall if you were in the room, we have
about 2,500 frontline people who work on employment taxes. That
is out of our frontline enforcement personnel of about 20,000,
and they have to take care of all employment tax issues where
you are my employee, which from our point of view, is the
substantially more important issue. I have come on hard times
in my small business, so I am taking your Social Security out,
but I am not sending it over to Jim. That is a problem.
Mr. BECERRA. Let me ask you this: Is it still the case that
some $300 to $350 billion of taxes that are owed go unpaid?
Mr. EVERSON. Yes, sir. We just updated our study on the tax
gap and refined it from last year, relating to the year 2001,
and the gross tax gap is about $345 billion.
Mr. BECERRA. Most of it has nothing to do whether there is
an undocumented immigrant working in this country paying or not
paying taxes.
Mr. EVERSON. That is correct. We have a very high
compliance rate in this country. It is about 83 and half
percent, but the amount of money that we could bring in by
improving that is significant.
Mr. BECERRA. What happens if all of a sudden we announce
that the Federal Government is going to allow IRS to share
information with DHS for immigration purposes to try to track
down undocumented immigrants? Do you think those undocumented
immigrants who are here without documents to work but are
working and actually are filing tax returns, do you think they
are going to file tax returns?
Mr. EVERSON. Well, this is the basic concern that I have
outlined and the situation that as we have these discussions
that are referenced that I think we all need to consider.
Because right now, increasingly, people who are here working
illegally feel comfortable participating in the tax system.
Mr. BECERRA. We have less compliance, chances are, if we
found that all of a sudden IRS is complying with DHS on sharing
information about people's tax filing?
Mr. EVERSON. I agree with that in the short term. However,
if Secretary Baker is able to really fix this problem and the
people in the country are here legally, over the long term, we
will get it right. Where we can't go is not fix that situation
and hurt tax administration.
Mr. BECERRA. Well, let's turn to Secretary Baker. Before I
leave you, Mr. Commissioner, I want to thank you for your quick
action recently on this Refund Freeze program that you have.
Once the taxpayer advocate indicated that there were some real
problems in the way some low-income individuals were having
their legitimate refunds suspended for over a period of 8
months to more than a year in some cases.
I want to thank you for the action you have taken to make
sure that folks who exist on $13,000 a year are able to get
their refund that they legitimately earned. I want to thank you
for that.
Mr. EVERSON. Yes, sir. Thank you.
Mr. BECERRA. Will we have now notice go out for this filing
period coming up?
Mr. EVERSON. Yes, the notices will go out. We are putting
that in place this filing season.
Mr. BECERRA. How about all those folks who still haven't
received their refunds who legitimately earned them who are
still waiting?
Mr. EVERSON. We are going to have to work through the old
inventory probably after we get out of this filing season. We
will do that as quickly as we possibly can.
Mr. BECERRA. Can we chat about that, because there are a
whole bunch of folks who are existing on meager incomes who are
still waiting.
Mr. EVERSON. We are going to do it as quickly as we can,
sir.
Mr. BECERRA. Thank you. Mr. Secretary, let me ask you a
couple of questions, and also I think Mr. Johnson touched on
this. We have a number of folks that we have acted on to deport
from this country because they don't have the permission to be
here, and that is the way we should handle it. We have a whole
bunch of folks who are employing these individuals and creating
this tremendous magnet for people from across the world to come
into this country to work, because even if they are working at
substandard wages here in this country, they are still making
more than they could have ever hoped to have made in their home
country.
If we are not prosecuting folks who are hiring folks who
don't have the right to work in this country, and if we allow
people to make the excuse that they reasonably relied on
documents of someone who is a clear immigrant to work in this
country, how will we ever solve the problem of legitimately
allowing only those entitled to work in this country to do so?
Mr. BAKER. I think you make a good point. There is no doubt
the vast majority of people who have employed illegal
immigrants don't know it, obeyed the law, and were the victims
of someone who gave them false documents. I think there are
also people whose business model is violating the immigration
law. We need tools to go after them, whether it is criminal law
or higher fines, and ability to attack pattern or practice, we
do need authority to do that.
Mr. BECERRA. Would you agree with the Commissioner that if
we give you better tools, you can do a better job than if you
necessarily went out and started getting information from the
IRS to try to help you track down that information through some
indirect way?
Mr. BAKER. We do need the information. There is no doubt
about that. We have not asked for tax return information, so we
are not asking for the kind of information that would directly
impinge on people's willingness to file tax returns. There is
no doubt, as Mr. Johnson suggests, we would also need the
ability to put people in detention while we are trying to get
them out of the country.
Mr. BECERRA. Absolutely. Absolutely. Thank you very much.
Thanks, Mr. Chairman.
Chairman MCCRERY. Yes, sir. Mr. Hayworth.
Mr. HAYWORTH. Mr. Chairman, thank you for holding this
joint hearing. My gratitude is exceeded only by my
disappointment and that is putting it mildly for the ample
display of what can only be described as a schizophrenic policy
concerning our borders and the presence of illegal aliens, not
undocumented workers--that is Orwellian newspeak--workers who
have documents galore coming in to our system.
What distresses me most is the complete and utter lack of
urgency inherent in all the remarks and testimony we have
received this morning. Secretary Baker, please pass along to
Secretary Chertoff, who I am sure is here testifying in other
areas this morning, my genuine concern that the evaluation he
proffered in Houston in November when he said it was his goal
to gain operational control of our borders in 5 years time. For
a Nation at war, that is wholly unacceptable.
Commissioner Everson, thank you for coming, sir, and I
realize you have worn both hats at different times in history.
To suggest on one hand that we can have strict enforcement at
the same time liberal employment, which it is not my intent to
put words in your mouth, sir, but I take as well, basically,
the status quo. Let us continue to let businesses gainfully
employ illegals or perhaps more accurately in terms of keeping
with the stated policy of the Administration create a new type
of program that the intent may not be amnesty, but that is
really what it is.
Mr. EVERSON. If I could, sir, I want to clarify this.
Mr. HAYWORTH. Please do.
Mr. EVERSON. I am saying if you clearly clamp down on the
illegal, you will want to expand legal. That is all I am
saying.
Mr. HAYWORTH. Okay. Well, I thank you. Reclaiming my time,
let me also get you to clarify granted the fact that revenue is
the middle name of the organization that you so ably represent,
Commissioner, if you had the opportunity to have bank robbers
file returns and gain that revenue, do you think that would be
helpful for paying the Nation's bills? Would you suggest that
as a policy action? If we could get the identity of bank
robbers and other thieves in our society and get the revenue, a
portion of that revenue that they have attained through ill-
gotten gains, would that be helpful to solve the revenue
challenges we confront?
Mr. EVERSON. Well, sir, we obviously pursue illegal source
income, and it is an important part of criminal prosecution.
Again, as I stated at the top of the hour, we want our share,
our tax share, whether the income was earned legally or
illegally.
Mr. HAYWORTH. Yes, again--but again, I want to understand
this. Revenue is the final notion. However you can get your
hands on it, however it is earned, the bottom line with your
organization is getting that revenue?
Mr. EVERSON. That is correct, sir.
Mr. HAYWORTH. It would follow that if there are criminal
enterprises, we want that revenue as well, and if we just have
to look the other way on the criminal enterprise at hand to
gain the revenue, well, so be it.
Mr. EVERSON. No. That is not what we are doing. I don't
agree with that at all. That is a mischaracterization.
Mr. HAYWORTH. Good. Mr. Commissioner, please, please.
Reclaiming my time, I offer the mischaracterization
purposefully, Mr. Chairman, and with your indulgence, because
it points out the inherent schizophrenia of the policy the
Administration and quite frankly many on the right and left--on
the right for cheap labor, on the left for cheap votes--are
trying to create for a Nation at war.
It is inherently disappointing and inherently dangerous,
and it is the wrong path at the wrong reasons for the wrong
times. I have heard from all three of you gentlemen words to
the effect that we have to bring people out of the shadows.
I believe, gentlemen, we will be far better off shining the
lights on employers and employees alike, enforcing existing
laws, beefing those laws up where we need to, and I will just
tell you I appreciate the spirit in which you come, but whether
it is 5 year's time to get control of the border or a year's
time to come back with an incisive report, gentlemen, the
legislative branch can only do so much. The executive branch
exists, of course, to administer and execute the laws.
We may have imperfection in laws. There is testimony that
exists today in some ways that we can help streamline and
improve it, but please understand, and convey to all of your
cohorts in the Administration though we may, for the most part,
share a letter of affiliation politically, there is deep
dissatisfaction across the Nation with the continued pursuit of
a schizophrenic policy that is wholly impractical. I thank you
for your time and your indulgence. I thank you, Mr. Chairman.
Chairman MCCRERY. Yes, sir. Thank you, Mr. Hayworth.
Gentlemen, we have a couple of votes on the floor, so if you
don't mind, we are going to recess the Subcommittee just long
enough for us to go over and vote and return. If the first
panel wouldn't mind staying, there are still Members who would
like to address questions to you. Is that satisfactory?
Mr. EVERSON. I never like taking questions from Earl
Pomeroy, if that is who you mean?
[Laughter.]
Chairman MCCRERY. Well, I don't know if he will come back,
but the Committee is in recess.
[Recess.]
Chairman MCCRERY. The Committee will come to order. Thank
you, gentlemen, for being patient and waiting as we completed
those votes on the floor. Now, we will resume questioning with
Mr. Pomeroy.
Mr. POMEROY. I thank the Chair and especially note my
feelings of appreciation to Commissioner Everson. Now that I am
not Ranking Member anymore, I did not expect such courtesy as
to have you wait. The--you will forgive my confusion, but in
reading the testimony, I am having a little trouble
understanding where principally this worksite enforcement
business falls. I have listened very closely to the discussion
earlier in this hearing. I think it was Congressman Johnson,
who noted that worksite enforcement actions were three last
year. That is from a number of 417 in 1999; three in 2004.
Now, this worksite enforcement of the immigration law, Mr.
Baker, is principally DHS Immigration; right?
Now, I note in your testimony you state a vigorous
enforcement of our worksite immigration laws is a crucial step
in moving toward a system where foreign migrant workers are
employed in this country legally and transparently.
Can you describe to us how this jibes? It looks to us like
worksite enforcement has not been something that has been
subject to much attention at DHS.
Mr. BAKER. I am glad to address that. There has been a
shift in the way in which we have approached worksite
enforcement, including a focus on critical infrastructures, as
I said earlier. We are particularly concerned about people who
are not here legally working in baggage handling facilities at
airports or at chemical plants where they could do real damage
with an act of sabotage or just an accident.
There has also been an increased focus on trying to find
ways to work with employers to get employers to do some more
work, take more responsibility for doing some of the screening;
getting employers to join the basic pilot so that they can
check people at the intake point rather than afterward when we
are trying to get access to no-match records.
I think there is no doubt that we need to expand our
enforcement efforts. We need better tools to be able to do
that. I am hoping that the Administration shortly will be
proposing new ways of doing enforcement so that we can improve
our record.
Mr. POMEROY. The DHS is having a tough week, and let me
acknowledge that I think you have a very difficult job, an
impossible job, in light of some of the circumstances--various
laws and then circumstances on the ground leave you to resolve.
Sometimes I think that from the dais here we don't
appropriately recognize the extraordinary difficulty of your
mission. Having said that, it seems to me that this is a time
where DHS, this enormous Agency, that obviously has yet to
figure out how to effectively use all the wherewithal at its
disposal, be it natural disaster response in Katrina, as we are
seeing in the Senate this week, or worksite immigration law
enforcement, which has dropped to three actions last year, even
though your testimony this morning says it is a crucial step--
your words. We have got some hesitation about now you want to
get all this IRS data. I don't know that you have fully figured
out how to use the data you have already got.
Now that is--maybe in the rest of my time we can get to the
bottom whether or not we think that there is quite the treasure
trove of information here that you think there is. You indicate
that there is a--this SSN mismatch is all about evasion of
immigration laws.
Commissioner Everson, do you think--or Commissioner
Lockhart--are there other explanations? Do you conclude that
all of these mismatches represent a fraudulent effort to hide
illegal immigration or sometimes do people just screw up, and
it is inadvertent error or attributed to other reasons?
Mr. LOCKHART. You want me to go?--Well, certainly the
mismatch file, which, as I said, confirms about 8.8 million was
for tax year 2003, is composed of a lot of different pieces. We
do a lot of scrubbing to try to correct typographical errors
and other things, but certainly people change their names.
People get married, change their names, and--or the people use
the wrong name with the employer, or they mainly use a nickname
that doesn't match the name in our records. There is a lot of
activity in the suspense file that is not related to
undocumented workers. On the other hand, there is probably a
significant number that is related to undocumented workers.
Mr. POMEROY. Fifty-fifty. Ninety-ten? Any idea?
Mr. LOCKHART. We really don't have good data on that. I
would say it is less than the 90 to 95 percent that DHS has
said, but I don't know how much less.
Mr. POMEROY. Okay. My time is up, Mr. Chairman. I thank
you. Mr. Everson, next time.
[Laughter.]
Mr. EVERSON. I will look forward to it, sir.
[Laughter.]
Chairman MCCRERY. Ms. Tubbs Jones.
Ms. TUBBS JONES. Thank you, Mr. Chairman. Good afternoon,
good morning, gentlemen. It is still morning. Let me start with
Secretary Baker. How are you, sir?
Mr. BAKER. Very good. Thank you.
Ms. TUBBS JONES. Good. I need my glasses, because this
print is too little. Maybe that is why your employers don't
want to fill this out. The OMB Form 1615-0047, Employment
Eligibility Verification, are you familiar with that form?
Mr. BAKER. I am not sure that I am.
Ms. TUBBS JONES. Okay. Novena. It is called an I-9?
Mr. BAKER. Yes.
[Laughter.]
Ms. TUBBS JONES. All I have to do is give you the right
number; right?
Mr. BAKER. Yes, exactly.
Ms. TUBBS JONES. Okay. The I-9 has a section that gives
employee information and verification, and the employee is
required to fill that out with an SSN. Then Section Two is an
Employer Review and Verification and has several sections to
it. Then it gives the employer--it gives the employer as well
as you a list of acceptable documents to document the employee
eligibility and the like. Now, this is the same information
that you are asking that the IRS provide to you, or you would
like to have from the IRS for purposes of preventing terrorism
or whatever; right?
Mr. BAKER. Much of it, yes.
Ms. TUBBS JONES. Now, when you receive this form the
employers, what do you do with it?
Mr. BAKER. We actually, as I remember, we ask them to hang
onto that. I am not sure that we are asking them to file that.
Ms. TUBBS JONES. Okay. You ask the employer to hang onto
it, so it is information that is within your grasp, since it is
a form required by your Department?
Mr. BAKER. We could ask for it, yes.
Ms. TUBBS JONES. Right. Have you ever used this information
in order to reach the compliance that you are trying to get
from the IRS?
Mr. BAKER. The difficulty with that information is it is in
the hands of the employer, and the question is which employer--
if we went to an employer, we could say we would like to see
your I-9 forms.
The difficulty is in choosing which employer we are going
to devote scarce investigative resources to, and what we are
hoping is that access to the Social Security information will
allow us to say, well, here is a place we ought to look as
opposed to----
Ms. TUBBS JONES. Well, now, let me ask you this:
Historically, before you ever had this form, you have a group
of employers who you believe historically have not complied
with or have been--what is the better word--consistently
employing people without verifiable or legitimate papers to be
in the United States; right?
Mr. BAKER. Right. Yes.
Ms. TUBBS JONES. It clearly is more than the three that you
have investigated since 1999; right?
Mr. BAKER. I am sure there are more people than that.
Ms. TUBBS JONES. Wouldn't that be a logical place to start
with the employers, just to--even if you just want to try it
out and see if it would work and that you wouldn't use scarce
resources in order to do that?
Mr. BAKER. The difficulty is picking the right people;
picking companies where we are most likely to find abuses. This
is a tool that would allow us to identify people who are mostly
likely to have abuses to find.
Ms. TUBBS JONES. The IRS has suggested to you that the 300
worst companies are in agriculture, restaurant, and day labor
groups. Is that a logical place for you to start your search?
Mr. BAKER. Yes. Certainly, we could look in those
industries, but then we would be picking blind among an
enormous number of restaurants.
Ms. TUBBS JONES. I am a former prosecutor, and one of the
offenses that we deal with--we couldn't catch the person
stealing the car, but they were driving the car, so there is an
offense called receiving stolen property, other than theft.
There is something in the course of what you do that you don't
have to necessarily establish the underlying offense, but you
could look at the fact that these people were there or whatever
in order to reach some compliance. I hate I am running out of
time with just you.
I would just hope that there will be other processes by
which you would try to figure out how you handle that. I am not
necessarily totally in support of the IRS not having to provide
the information. I am still angry that when I pick up the phone
and call--dial my bank I have to give my SSN in order to reach
my money. It is clearly we have gone outside of the traditional
private area or what we call private in the sake of tapping my
telephone and so forth and so on.
Maybe there would be an opportunity to do what you want to
do without reaching into the private area--private information
of people.
Mr. BAKER. We are not asking for authority to tap your
telephone.
Ms. TUBBS JONES. Oh, I know you personally are not doing
that, but somebody is. Not my personal phone, but I mean--well,
we won't--what I am talking about? Everybody does. It has been
all over TV.
I yield back my time. Thanks--if I have any.
Chairman MCCRERY. Thank you. Mr. Everson, Mr. Lockhart, and
Mr. Baker, thank you very much for your testimony, and your
answering our questions. We look forward to having you back in
not too many more months to get an update on this important
issue. Thank you.
Mr. BAKER. Thank you.
Chairman MCCRERY. Now, I would call the second panel. The
Honorable Patrick P. O'Carroll, Inspector General, SSA; Barbara
D. Bovbjerg, Director, Education, Workforce, and Income
Security Issues, General Accountability Office (GAO).
Thank you, both, for being patient, as we worked our way
through the first panel and the votes like the first panel,
your written testimony will be admitted to the record in its
entirety, and we would like for you to summarize your testimony
in about 5 minutes. We will begin with Mr. O'Carroll.
STATEMENT OF THE HONORABLE PATRICK P. O'CARROLL, INSPECTOR
GENERAL, SOCIAL SECURITY ADMINISTRATION
Mr. O'CARROLL. Good afternoon, Chairman McCrery, Chairman
Ramstad, and Members of both Subcommittees. Thank you for the
invitation to be here today. Today's issue is one of the most
persistent we have faced in our 11 years as an organization--
SSN misuse as it pertains to the reporting of wages. As you
know, SSA receives wage reports, W-2 forms from employers, and
posts the wages to workers' accounts.
When a wage report contains errors and cannot be properly
posted to a worker's account, it is instead placed in the ESF.
As of November 2005, there were 255 million wage items placed
in the ESF, representing $520 billion in wages through Tax Year
2003. In 1998, SSA's first IG testified before Congress and
identified the major challenges facing SSA. After solvency, the
first challenge on his list was the ESF. In 2002, SSA's second
IG testified that the ESF remained one of the great challenges
facing SSA. He also placed particular emphasis on immigration,
and on the impact unauthorized workers have on the ESF.
Now, I stand before you, as SSA's third IG. The ESF remains
one of SSA's greatest challenges, and the most significant
impediments to resolving that challenge are unchanged: first,
the lack of sanctions against the most egregious employers;
and, second, legal obstacles that prevent SSA from sharing data
with employers and immigration authorities. It would be an
unfortunate neglect of the trust placed in us if SSA's fourth
IG someday testifies that the same two obstacles remain in
place.
Last year, we issued two audit reports that highlighted the
need for an effective program of sanctions against employers
who repeatedly submit high volumes of erroneous wage reports:
the first report noted significant problems in the restaurant,
service, and agriculture industries, and repeated prior
recommendations for SSA to intensify talks with the IRS aimed
at convincing IRS to make more effective use of existing
sanctions.
The second report recommended more outreach to employers as
part of the issuance of ``no-match'' letters by SSA. However,
SSA responded that with no fear of retribution, employers had
generally determined that their current practices met their
needs.
A high proportion of ESF entries results from wages
reported for work performed by non-citizens who do not have
work authorization from DHS. Unfortunately, SSA and the IRS
interpret current law so as to prohibit SSA from sharing
information from the ESF with the DHS, even as it pertains to
the most consistently egregious employers. Information that
could help address the ESF problem is in SSA's hands, but SSA
must remain mute. The authority to sanction and deter employers
is in the IRS' hands, but the IRS rarely exercises that
authority.
While the ESF is the largest repository of misinformation,
another file exists that is similarly troubling. Each year, SSA
is required by law to submit to DHS the names and SSNs of all
employees with wages reported under the ``non-work'' SSNs.
While SSA shares this information with DHS, little has been
done to analyze and utilize the information, and, more
importantly, the disclosure laws I mentioned earlier also
prohibit SSA from informing employers that they have illegal
workers in their employment.
In summary, disclosure laws handcuff SSA and DHS and keep
them from making meaningful progress with respect to
unauthorized non-citizens, and with regard to the ESF, this
difficulty is exacerbated by the lack of sanctions against
employers who have been given no reason to comply with the law.
Without meaningful change, you will likely hear the same
frustration from my successor that you have heard from my
predecessors and from me.
Thank you again for inviting me to be here today, and I
will be happy to address any questions you may have.
[The prepared statement of Mr. O'Carroll follows:]
Statement of The Honorable Patrick P. O'Carroll, Inspector General,
Social Security Administration
Good Morning, Chairman McCrery, Mr. Levin, Chairman Ramstad, Mr.
Lewis. It's a pleasure to be here today to discuss these important
issues of mutual interest. I was disappointed when I was unable to
testify at the first hearing in this ``SSN High-Risk Issues'' series
due to a previously scheduled trip abroad, but I understand that the
hearing went very well, and I'm pleased to be here for the second
hearing in the series.
Since this is our first time together since I was sworn in as the
Social Security Administration's (SSA) Inspector General, I'd like to
take just a moment to familiarize you with our organization. We were
established on March 31, 1995, the day SSA became independent of the
Department of Health and Human Services (HHS) by virtue of the Social
Security Independence and Program Improvements Act of 1994. Prior to
that, the Inspector General for HHS was charged with stewardship
responsibilities over SSA's programs and operations. Last year, we
marked the completion of our first decade of service as an
organization, and I believe that our accomplishments over that first
decade are a testament not only to our talented and hard-working staff,
but to SSA and its leadership, who have been ceaselessly supportive of
our efforts.
Our office, like all Federal offices of Inspector General, has two
statutory components:
Our Office of Investigations is comprised of 388 Special Agents and
support staff, located in about 70 cities across the country. By
conducting independent criminal investigations into violations of the
Social Security Act and the U.S. Criminal Code, we protect SSA funds,
SSA programs, and most importantly, SSA employees on a daily basis. We
also work closely with other Federal agencies to ensure homeland
security, and provide for disaster relief and integrity in recovery
operations, such as in the aftermath of Hurricane Katrina last year. In
Fiscal Year 2005, the Office of Investigations opened over 9,500
criminal investigations, resulting in well over 2,000 convictions, and
almost a quarter billion dollars in restitution orders, repayment
agreements, fines, recoveries and savings. Our Special Agents are among
the most talented and committed law enforcement officers in the land,
and I'm enormously proud of the work they do.
Our Office of Audit is equally impressive. Across the country, some
154 auditors and support personnel conduct in-depth audits and reviews
of Social Security programs and operations to ensure that tax dollars
are wisely spent and benefits are properly paid. In Fiscal Year 2005,
the Office of Audit issued 108 reports, identifying potential savings
of about $375 million, and over $187 million in funds that could be put
to better use.
In addition to these statutory components, our Office of Chief
Counsel, in addition to providing legal advice and guidance to me and
my staff, administers the Civil Monetary Penalty (CMP) program. Through
their efforts, imposing civil penalties on those who would defraud SSA,
or would use SSA's good name to deceive the American public, we
assessed more than $700,000 in penalties and assessments in Fiscal Year
2005.
Finally, our Office of Resource Management makes all of our work
possible. By providing budget, human resource, information technology,
and other critical services, they keep the Office of the Inspector
General running.
Over the course of what is now almost 11 full years, we have seen
issues resolved and, more often, new issues arise, but there are issues
that we inherited on Day One that are still with us after all this
time. The challenges we are discussing today are among those that have
persisted.
As you know, SSA receives wage reports from employers and posts the
wages to workers' accounts. This enables SSA to make accurate benefit
eligibility determinations and administer its programs. But when a wage
report contains errors, and cannot be properly posted to a worker's
account, it is instead placed in the Earnings Suspense File, or ESF,
until it can be resolved. As of November 2005, there were 255 million
wage items placed in the ESF, representing $520 billion in wages
through Tax Year 2003. Looking at ESF entries on a yearly basis, the
number of entries increased significantly during the decade between
1993 and 2003, but starting in 2001, the increases stopped, and began
holding steady. While this is a hopeful sign, we do not believe it
means that a solution has been found. To the contrary, while hard work
by my office and by SSA has slowed the tide, the same obstacles to
truly meaningful improvement in the ESF that existed a decade ago
remain in our paths today.
In 1998, less than 3 years after the formation of our office, SSA's
first confirmed Inspector General testified before Congress and
identified the eight greatest challenges facing SSA. After identifying
solvency as the first issue, he stated that ``Second is the problem of
erroneous wage reports held in SSA's Suspense Account. At the end of FY
1997, the cumulative balance of employee wages held in SSA's suspense
account exceeded $240 billion, and it continues to grow. Unless
corrected, suspended wages could reduce the amount of Title II benefits
paid to individuals and their families. SSA must implement its newly
established tactical plan to resolve suspended wages and evaluate its
effectiveness.'' In the years that followed, we made many
recommendations through our audit work and provided evidence through
our investigations of a need to implement those recommendations, but
the issue remained largely unresolved.
More than 4 years later, in 2002, SSA's second confirmed Inspector
General appeared before Congress and testified that the ESF remained
one of the great challenges facing SSA. In that testimony, he
identified the two most significant obstacles to improvement in the
ESF. First, he pointed out that without a robust program of sanctions
against employers who habitually misreport earnings for their
employees, there is no incentive for employers to comply with the law,
and that the authority to impose such sanctions rested with the
Internal Revenue Service (IRS). Second, he emphasized the role that
unauthorized non-citizens play in the increases in the ESF, and the
fact that IRS disclosure laws limited the data sharing necessary to
bring about significant improvement. Again, our efforts, and SSA's
efforts, continued, but these two obstacles remained in place.
Now, 4 more years have passed, and I stand before you as SSA's
third confirmed Inspector General. More recommendations have been made
to SSA; some have been agreed to, some have even been implemented.
Nevertheless, the ESF remains one of SSA's greatest challenges, and the
most significant impediments to resolving that challenge are unchanged:
the lack of a meaningful program of sanctions against the most
egregious employers, and legal obstacles that prevent SSA from sharing
meaningful data with immigration authorities and employers.
I would submit that it would be an unfortunate neglect of the trust
placed in all of us if, when my tenure is over, SSA's fourth confirmed
Inspector General walks through these doors and tells the same story.
Last year, we issued two audit reports that highlighted the need
for effective sanctions against problem employers. One of these reports
addressed the issue of misreported wages in some of the most
problematic industries--the restaurant, service, and agriculture
industries--and repeated yet again the need to collaborate with the IRS
on an effective sanctions program. Unfortunately, talks with the IRS
have been ongoing for years, and even with respect to the nation's most
egregious violators of the wage reporting laws, sanctions are rarely
imposed. We have recommended in the past that SSA seek legislative
authority to create an SSA-based sanctions program, but they have
responded that this authority is properly with the IRS. We have
recommended repeatedly that SSA intensify talks with the IRS to bring
about a robust IRS-based sanctions program using long-existing
authority, and SSA has generally followed our recommendations, but to
no avail. Whether through the creation of new authority or more active
use of existing authority, sanctions are an absolutely critical element
of any plan that hopes to reduce the size of the ESF in a meaningful
way.
The second report we issued last year sought new approaches to the
problem, recognizing that while sanctions and expanded disclosure
authority were the keys to significant progress, other measures could
be taken that would at least bring about some degree of improvement. We
looked at SSA's process for notifying employers and wage-earners of
misreported wages, a process known as ``DECOR,'' or Decentralized
Correspondence. When name and SSN information on a W-2 form do not
match, and the wages must be posted to the ESF, SSA sends a ``no-match
letter'' to either the employee or, if there is no proper address for
the employee, to the employer, pointing out the discrepancy and
requesting a correction. Since prior recommendations dealing with
encouraging IRS to make better use of its authority to impose sanctions
had not yet borne fruit, this report instead focused on actions that
SSA can take with the information in the DECOR database to bring about
some degree of improvement in the wage reporting process.
We made several recommendations to SSA aimed at improving outreach,
education, and trend analysis. While SSA agreed with many of our
points, they returned to the issue that has become a central theme in
looking at the ESF, stating that employers would still have little
reason to change their ways. In its comments, SSA stated that
``educational outreach is not a strong motivator for change with
employers who have found their current wage reporting methods meet
their needs without fear of any retribution.''
The disclosure issue is similarly daunting. We believe the chief
cause of wage items being posted to the ESF instead of an individual's
earnings record is unauthorized work by noncitizens. Under existing
law, as interpreted by SSA and the IRS, SSA cannot share data from the
ESF with the Department of Homeland Security (DHS). For example, these
laws make it impossible for SSA to provide DHS information regarding
even the most egregious employers who routinely submit large numbers of
inaccurate wage statements in which employee SSNs and names do not
match SSA records. We believe disclosure limitations such as these
perpetuate illegal work, erroneous wage reports, and the growth of the
ESF. Most of the information necessary to address the ESF problem is in
SSA's possession, but SSA must remain mute; all of the authority to
sanction employers and deter continued violations is in the IRS' hands,
but the IRS chooses not to act. The only greater surprise than this
bureaucratic gridlock is the fact that the ESF is not even larger than
it is.
While the ESF is by far the larger indicator of unauthorized
noncitizens working in the U.S., another indicator which involves a
smaller population of individuals engaged in unauthorized work is the
Nonwork Alien, or NWALIEN File, and here again, disclosure issues pose
an obstacle. We have issued multiple reports, and are on the verge of
issuing yet another, that address the impact that non-citizens without
authorization to work in the United States are having on SSN integrity,
the Agency's future responsibility to pay benefits and, even more
disturbing, improper employment in sensitive and critical industries.
In 2000, 2001, and again in 2005, we examined SSN misuse and wage
reporting issues with a focus on wages improperly earned by non-
citizens without authorization to work in the United States--those whom
SSA has assigned ``nonwork'' Social Security numbers. Each time, we
identified as a significant obstacle in addressing this issue the
limited ability of SSA to share information. SSA is required by law to
annually share with DHS the NWALIEN File, a file of noncitizens who
have received earnings using a non-work Social Security number.
However, since this law was enacted in 1996, little has been done by
SSA and DHS to analyze, attempt to reconcile and/or correct, and use
this information for immigration enforcement purposes. Additionally,
SSA believes privacy provisions of the Internal Revenue Code prohibit
SSA from notifying employers when employees with non-work SSNs, who may
not have DHS authorization to work, are in their employ. While SSA and
DHS have extensive information at their disposal, they have been unable
to find a way to work with the information to prevent, detect, and
enforce unauthorized employment.
In short, our work has shown, over the course of more than a
decade, that until these obstacles are removed, either through
legislation or cooperation, there is unlikely to be a truly meaningful
reduction in the size of the ESF. Unless and until employers are either
required to verify SSNs prior to submitting wage reports, or faced with
stiff penalties for erroneous wage reports, there is no incentive for
employers to do anything differently. And with limited ability to share
meaningful information with immigration authorities and employers,
there is relatively little SSA can do alone to address the significant
impact non-citizens have on the ESF, the NWALIEN file, and ultimately,
SSN integrity.
The information is at our fingertips. We can identify the most
egregious employers with respect to wage reporting irregularities, but
no action is taken against them by IRS, and no action can be taken
against them by our office or by SSA. We can identify the employers
with the most unauthorized non-citizens on their payrolls, but we
cannot tell the employers who the unauthorized employees are. We know
the scope of the unauthorized non-citizen issue is significant, but SSA
cannot share adequate information with DHS to provide truly useful
information.
We will, of course, continue our work aimed at quantifying and
identifying discrete issues and proposing program improvements, but
these improvements will likely continue to be relatively minor when
viewed against the size of the ESF. We stand ready, however, to work
with you and other members of Congress to bring about truly meaningful
change.
Thank you again for inviting me to speak with you today, and I'd be
happy to answer any questions.
Chairman MCCRERY. Thank you, Mr. Inspector General. Ms.
Bovbjerg.
STATEMENT OF BARBARA D. BOVBJERG, DIRECTOR, EDUCATION,
WORKFORCE, AND SECURITY ISSUES, U.S. GOVERNMENT ACCOUNTABILITY
OFFICE
Ms. BOVBJERG. Thank you, Mr. Chairman. Good afternoon, Mr.
Chairman, Ms. Tubbs Jones. I am happy to be back today, this
time to discuss the use of SSN data to reduce unauthorized
work. No one is lawfully permitted to work in the U.S. without
a valid SSN and either citizenship or work authorization. Yet,
non-citizens work without such authorization and gain
employment using false information. How such unauthorized work
can be detected and prevented clearly continues to challenge
the agencies involved.
Today, I would like quickly to discuss two things: the
Social Security data that can help identify unauthorized
employment and issues for improving the usefulness of the data.
First, let me talk about the Social Security data. The SSA has
two types of data useful to preventing and detecting
unauthorized work: the Participant Records and the Earnings
Reports. Participant records that include the name, date of
birth, and SSN, among other things, can be used to verify that
a worker seeking employment is providing the SSN assigned to
someone of that name.
The SSA uses these data to provide both batch and web-based
verification services for employers' use on a voluntary basis.
The service is designed to assure accurate employer wage
reporting and discourage hiring of unauthorized workers are
offered free of charge. The SSA also uses Participant Records
in a verification system developed by DHS--DHS offers
electronic verification of worker status by a program called
the Basic Pilot.
This program sends employee data through SSA to verify name
and SSN, and, for non-citizens, also through DHS to verify that
the person is both legally present and authorized to work. This
system too is voluntary and has only recently been available
nationwide. None of these verification systems is widely used
by employers.
The SSA's earnings data provide a different sort of
information. There are two SSA data files for these records
that Mr. O'Carroll mentioned. The first, SSA's Non-Work Alien
File, contains earnings reports that are posted under non-work
authorized SSNs. These records are thought to belong to a group
of people who may be in the U.S. legally that may also be
working without authorization. Under law, SSA passes this file
to DHS annually, but, as Mr. O'Carroll stated, little has been
done with that information.
The second type of earnings data is found in the ESF. The
ESF holds earnings reports where the name and SSN cannot be
matched to records in SSA's Participant Files. The GAO has
reported that this file, which contains almost 300 million
records, appears to include an increasing number of earnings
records associated with unauthorized work, but is not regularly
used as a DHS enforcement tool because the file contains
legally protected taxpayer information. Let me turn now to the
usefulness of the data in addressing unauthorized work.
Under the current arrangement with the Non-Work Alien File,
DHS staff believe they would have to invest significant
resources to determine which workers are truly still
unauthorized; a number of those whose records are in the Non-
Work Alien file may have been authorized but have not informed
SSA of the change in status. Also, the lack of a common
identifier for records in DHS and SSA files makes the matching
process difficult and time consuming, and the lack of industry
codes associated with the employers prevents DHS from targeting
employers in the critical infrastructure areas that are
important to homeland security.
The ESF, on the other hand, potentially has employer
information that is more useful to DHS, but some of the same
difficulties that pertain to the Non-Work File could also
affect the Suspense File's usefulness, and the sensitivity of
sharing taxpayer records means the case for their use outside
SSA must be truly compelling. If the challenges of the ESF can
be overcome, authorizing transmittal of at least some of that
protected information to DHS might be warranted. It is likely
that producing accurate and useful unauthorized work data from
these records could require a continued effort on the part of
SSA, DHS, and IRS, but these efforts will be of little value
without credible and coordinated enforcement programs in place.
The three agencies will still need to improve employer
reporting and worksite enforcement efforts, if measures to
improve the usefulness of existing data are to bear fruit.
In conclusion, the Federal Government can make better use
of information it already has to support enforcement of
immigration, work authorization, and tax laws. The Suspense and
Non-Work Alien Files have promise. The best information in the
world won't make a difference if the relevant Federal agencies
cannot work together to improve employer reporting compliance
and conduct targeted and effective worksite enforcement. That
concludes my statement. I welcome your questions.
[The prepared statement of Ms. Bovbjerg follows:]
Statement of Barbara D. Bovbjerg, Director, Education, Workforce, and
Income Security Issues, U.S. Government Accountability Office
Messrs. Chairmen and Members of the Subcommittees:
I am pleased to be here today to discuss Social Security numbers
(SSNs) and their use in preventing and detecting unauthorized work. To
lawfully work in the United States, individuals must have a valid SSN
and, if they are not citizens, authorization to work from the
Department of Homeland Security (DHS). Noncitizens seeking work are
required to provide both an SSN and evidence of work authorization to
their employers. Yet individuals without these required authorizations
can gain employment with false information. How these instances of
unauthorized work can be identified or prevented challenges the federal
agencies involved.
In prior GAO work on these issues, we have reported on the use of
Social Security Administration (SSA) data for identity and employment
eligibility verification. Although SSA's verification systems have
improved, use of SSA information in worksite enforcement continues to
be challenging. Today I will discuss two issues: (1) the Social
Security data that could help identify some unauthorized employment and
(2) coordination among SSA, DHS, and the Internal Revenue Service (IRS)
to improve the accuracy and usefulness of such data.
My statement is based primarily on prior GAO work on these topics.
We are presently conducting additional work for these subcommittees
examining the use of SSA data for detecting unauthorized work. To
determine how SSA and DHS are coordinating to improve earnings data, we
conducted interviews with officials from SSA, the SSA Office of the
Inspector General, and DHS. In addition, we obtained and reviewed data
from SSA on individuals who had reported earnings under a nonwork SSN,
and we reviewed other documentation provided to us by these agencies.
We began this review in October 2005 in accordance with generally
accepted government auditing standards, and our work is ongoing.
In summary, SSA has two types of data that could be useful for
addressing unauthorized work--Social Security records for individuals
and earnings reports. Individual Social Security records include name,
date of birth, and SSN, among other things. SSA uses these data to
provide SSN verification services free of charge to employers wishing
to assure themselves that the names and SSNs that their workers
provided match SSA's records. SSA also uses Social Security records in
a work authorization verification system called the Basic Pilot program
developed by DHS, which offers electronic verification of worker
status. These systems are voluntary and not widely used by employers.
SSA's earnings records provide a different sort of information that
could be used for identifying unauthorized work. SSA uses such records
to produce two relevant files. SSA's Nonwork Alien File contains
earnings reports that are posted to SSNs that were issued for nonwork
purposes, which suggests individuals are working without DHS work
authorization. By law, SSA provides nonwork alien information to DHS
annually, and our ongoing work for you suggests that a number of these
records are associated with people who became work authorized some time
after receiving their nonwork SSNs. A second file of interest, the
Earnings Suspense File (ESF), contains earnings reports in which the
name and SSN do not match SSA's records. We have reported that this
file, which contained 246 million records as of November 2004, appears
to include an increasing number of records associated with unauthorized
work.
Improving the usefulness of SSA data could help identify some
unauthorized work and ensure that limited enforcement resources are
targeted effectively. Ensuring that the most useful data are available
requires close coordination among the three federal agencies involved
in collecting and using the data--SSA, IRS, and DHS. We have previously
recommended that IRS work with DHS and SSA as it considers
strengthening its employer wage reporting regulations, as such action
could improve the accuracy of reported wage data, and that DHS, with
SSA, determine how best to use such wage data to identify potential
illegal work activity.
Background
The Social Security Act of 1935 authorized the SSA to establish a
record-keeping system to help manage the Social Security program and
resulted in the creation of the SSN. SSA uses the SSN as a means to
track workers' earnings and eligibility for Social Security benefits.
Through a process known as enumeration, each eligible person receives a
unique number, which SSA uses for recording workers' employment history
and Social Security benefits. SSNs are routinely issued to U.S.
citizens, and they are also available to noncitizens lawfully admitted
to the United States with permission to work. Lawfully admitted
noncitizens who lack DHS work authorization may qualify for an SSN for
nonwork purposes when a federal, state, or local law requires that they
have an SSN to obtain a particular welfare benefit or service. In this
case, the Social Security card notes that the SSN is ``Not Valid for
Employment.'' As of 2003, SSA had assigned slightly more than 7 million
nonwork SSNs. Over the years, SSA has tightened the requirements for
assigning nonwork SSNs.
In 1986, Congress passed the Immigration Reform and Control Act
(IRCA), which made it illegal for individuals and entities to knowingly
hire and continue to employ unauthorized workers. The act established a
two-pronged approach for helping to limit the employment of
unauthorized workers: (1) an employment verification process through
which employers are to verify newly hired workers' employment
eligibility and (2) a sanctions program for fining employers who do not
comply with the act. Under the employment verification process, workers
and employers must complete the Employment Eligibility Verification
Form (Form I-9) to certify that the workers are authorized to work in
the United States. Those employers who do not follow the verification
process can be sanctioned.
SSA Individual Records and Earnings Reports Can Identify Some
Unauthorized Work
SSA has two types of data useful to identifying unauthorized work--
individual Social Security records and earnings reports. Its individual
records, which include name, date of birth, and SSN, among other
things, can be used to verify that a worker is providing the SSN that
was assigned to a person of that name. These records are used in
verification services that are available free of charge to employers on
a voluntary basis. SSA's earnings reports could also be used to
identify some unauthorized work by reporting noncitizens who may have
worked without authorization and employers who have a history of
providing SSN/name combinations that do not match SSA records.
SSA Records Provide Verification Services to Improve Wage Data
SSA uses individual Social Security records in its Employee
Verification Service (EVS) and the Web-based SSN Verification Service
(SSNVS), which employers can use to assure themselves that the names
and SSNs of their workers match SSA's records. The services, designed
to ensure accurate employer wage reporting, are offered free of charge.
Employer use is voluntary. Although these systems only confirm whether
submitted names and SSNs match, they could help employers identify
workers who provide an SSN with fictitious information.
Over the years, SSA has developed several different verification
methods under EVS. For example, employers may submit lists of workers'
names and SSNs by mail on a variety of media, such as magnetic tapes or
diskettes. Alternatively, employers may call a toll-free number or
present a hard-copy list via fax, mail, or hand delivery to a local SSA
office. SSA verifies the information received from employers by
comparing it with information in its own records. SSA then advises the
employer whether worker names and SSNs match. EVS offers the benefit of
verifying name and SSN combinations for a company's entire payroll.
However, the system would
not be able to detect a worker's misuse of another person's name and
SSN as long as the name and SSN matched. Employers do not widely use
this service.
In an attempt to make verification more attractive to employers, in
2005, SSA implemented the Web-based SSNVS. It is designed to respond to
employer requests within 24 hours. Requests of up to 10 worker names
and SSNs can be verified instantaneously. Larger requests of up to
250,000 names can be submitted in a batch file, and SSA will provide
results by the next business day. While this new system is attracting
more employer interest, it is still not widely used.
SSA also uses its records in a work eligibility verification system
developed by DHS called the Basic Pilot, which offers electronic
verification of work authorization for newly hired workers. Use of this
program by employers is also voluntary, and the service has been
available nationwide only since December 2004. Employers who agree to
participate must electronically verify the status of all newly hired
workers within 3 days of hire, using information that a new hire is
required to provide. Under this program, an employer electronically
sends worker data through DHS to SSA to check the validity of the SSN,
name, date of birth, and citizenship provided by the worker. SSA
records are used to confirm information on citizens. For noncitizens,
SSA confirms SSN, name, and date of birth, then refers the request to
DHS to verify work authorization status against DHS's automated
records. If DHS cannot verify work authorization status for the
submitted name and SSN electronically, the query is referred to a DHS
field office for additional research by immigration status verifiers.
If SSA is unable to verify the SSN, name, and date of birth or DHS
record searches cannot verify work authorization, a tentative
nonconfirmation response is transmitted to the employer. After checking
the accuracy of the information and resubmitting the information, if
necessary, the employer must advise the worker of the finding and refer
him or her to either DHS or SSA to correct the problem. During this
time, employers are not to take any adverse actions against those
workers related to verification, such as limiting their work
assignments or pay. When workers do not contest their tentative
nonconfirmations within the allotted time, the Basic Pilot program
issues a final nonconfirmation. Employers are required to either
immediately terminate employment or notify DHS of their continued
employment.
Like SSA's verification services, the Basic Pilot is voluntary and
is not widely utilized. As of January 2006, about 5,500 businesses
nationwide had registered to participate, although a significantly
smaller number of these are active users. Active participants have made
about 4.7 million initial verification requests over a 5-year period
(981,000 requests were made in fiscal year 2005). DHS reported on
actions taken to address weaknesses in the program that had been
identified during the early years of the program. They included delays
in updating immigration records, erroneous nonconfirmations, and
program software that was not user friendly. We subsequently reported
on additional challenges, specifically, the capacity constraints of the
system, its inability to detect identity fraud, and the fact that the
program is limited to verifying work authorization of newly hired
workers.
SSA Earnings Data May Be Used to Identify Some Unauthorized Work
SSA's earnings records can also provide information on unauthorized
work. There are two sets of data that are relevant to unauthorized
work. The first set, the Nonwork Alien File, contains earnings reports
for SSNs that were issued for nonwork purposes. The second set, the
Earnings Suspense File, contains earnings reports in which the name and
SSN do not match. Both could help identify some unauthorized work.
SSA's Nonwork Alien File
SSA is required by law to provide its Nonwork Alien File to DHS
since it suggests a group of people who are in the United States
legally but may be working without authorization. Since 1998, SSA has
provided DHS annual data on over half a million persons with earnings
listed under nonwork SSNs. The file includes annual earnings amounts,
worker names and addresses, and employer names and addresses as well.
DHS has found this file to be of little use to enforcement
activities, however. According to DHS officials, the file is currently
not an effective tool for worksite enforcement due in part to
inaccuracies in the data and the absence of some information that would
help the department efficiently target its enforcement.
In fact, because SSA only updates work authorization status at the
request of the SSN holder, individuals in the file may now be U.S.
citizens or otherwise legal workers who simply have not updated their
status with SSA. Our ongoing work in this area suggests that a number
of these records are indeed associated with people who later obtained
permission to work from DHS. SSA policy is to update work author-
ization status when the SSN holder informs the agency of the status
change and provides supporting documentation. Unless the individual
informs SSA directly of the status change, SSA's enumeration records
will continue to show the person as unauthorized to work and will
record his or her earnings to the Nonwork Alien File. Currently, the
extent to which such noncitizens are included in the file is unknown,
but SSA and DHS officials have both acknowledged that the file may
include a number of people who are currently authorized to work.
DHS officials said that the file would be of greater value if it
contained DHS's identifying numbers--referred to as alien registration
numbers. According to DHS officials, because persons in the file do not
have an identifier in common use by both agencies, they cannot
automatically be matched with DHS records. As a result, DHS officials
told us that they use names and birth dates to match the records, which
can result in mismatches because names can change and numbers in birth
dates may be transposed. SSA officials have said that generally they do
not collect alien registration numbers from noncitizens. Collecting the
alien registration number and providing it in the Nonwork Alien File is
possible, they stated, but would require modifications to SSA's
information systems and procedures. They also noted that SSA would only
be able to collect the alien registration number when noncitizens are
assigned an SSN or when such an individual updates his or her record.
As part of its procedures, SSA is required to verify the immigration
status of noncitizens before assigning them an SSN, which requires
using alien registration numbers. However, some noncitizens, such as
those who have temporary visas, (e.g. students) may not have an alien
registration number. In these cases, SSA would not be able to include
the number in the Nonwork Alien File.
The time it takes SSA to validate earnings reports and convey the
Nonwork Alien File to DHS also makes the file less effective for
worksite enforcement. When SSA finishes its various processes to ensure
that the file includes the appropriate data, the reported earnings can
be up to 2 years old. By that time, many of the noncitizens included in
the file may have changed employers, relocated, or changed their
immigration status, resulting in out-of-date data on individuals or
ineffective leads for DHS agents.
A DHS official told us that if the Nonwork Alien File were to
contain industry codes for the reporting employers, DHS could target
those in industries considered critical for homeland security purposes,
which would be consistent with DHS's mission and enforcement
priorities. Having information about the industries the employers are
in would help them better link the data to areas of high enforcement
priority, such as airports, power plants, and military bases.
Earnings Suspense File
Another SSA earnings file, referred to as the Earnings Suspense
File, contains earnings reports in which the name and SSN do not match
SSA's records, suggesting employer or worker error or, potentially,
identity theft and unauthorized work. We have reported that this file,
which contained 246 million records as of November 2004, appears to
include an increasing number of records associated with unauthorized
work. SSA's Office of the Inspector General has used the ESF to
identify employers who have a history of providing names and SSNs that
do not match.
When SSA encounters earnings reports with names and SSNs that do
not match, it makes various attempts to correct them using over twenty
automated processes. However, about 4 percent of all earnings reports
still remain unmatched and are electronically placed in the ESF, where
SSA uses additional automated and manual processes to continue to
identify valid records. Forty-three percent of employers associated
with earnings reports in the ESF are from only 5 of the 83 broad
industry categories, with eating and drinking establishments and
construction being the top categories. A small portion of employers
also account for a disproportionate number of ESF reports. For example,
only about 8,900 employers--0.2 percent of all employers with reports
recorded in the ESF for tax years 1985-2000--submitted over 30 percent
of the reports we analyzed.
Our past work has documented that individuals who worked prior to
obtaining work authorization are a growing source of the unmatched
earnings reports in the ESF that are later reinstated to a worker's
account. Once workers obtain a valid SSN, they can provide SSA evidence
of prior earnings reports representing unauthorized employment prior to
receiving their SSN. Such earnings reports can then be used to
determine a worker's eligibility for benefits.
DHS officials believe that the ESF could be useful for targeting
its limited worksite enforcement resources. For example, they could use
the ESF to identify employers who provide large numbers of invalid SSNs
or names and SSNs that do not match. They told us that these employers
may knowingly hire unauthorized workers with no SSN or fraudulent SSNs
and that employers who are knowingly reporting
incorrect information about their workers might also be involved in
illegal activities involving unauthorized workers.
However, it is not clear that the ESF, which is much larger than
the Nonwork Alien File, would be manageable or allow for targeted
enforcement. The ESF contains hundreds of millions of records, many
unrelated to unauthorized work, making it difficult to use for
targeting limited resources. While the ESF may help identify some of
the most egregious employers of unauthorized workers, in terms of poor
earnings reporting, its focus is not on unauthorized workers. Our work
has shown that most of the reinstatements from the file belong to U.S.-
born citizens, not to unauthorized workers. In addition, because the
ESF contains privileged taxpayer data, SSA cannot share this
information with DHS without specific legislative authorization. SSA's
Office of the Inspector General has recommended that SSA seek
legislative authority to share this data with DHS, but SSA responded
that it is beyond the agency's purview to advance legislation to amend
the Internal Revenue Code in order to allow DHS access to tax return
information. IRS officials have also expressed concern that sharing
this data could decrease tax collections and compliance. We are
examining the usefulness of SSA data to DHS for these subcommittees,
and will consider ESF issues as part of this work.
Closer Coordination by SSA, IRS, and DHS Could Improve Usefulness of
SSA Earnings Data
Improving the usefulness of the data could help ensure that limited
enforcement resources are targeted effectively. SSA data could help
identify areas of unauthorized work, but closer collaboration among
SSA, IRS, and DHS can help to ensure that the most useful data are
available in a form that can be used efficiently for enforcement.
Under the current data-sharing arrangement, DHS officials believe
the agency would have to invest significant resources to determine
whether employers it targets are really hiring persons who are not work
authorized. DHS has stated that determining which nonwork SSN holders
are now authorized to work may not be cost-effective and would pull
resources from other national security-related initiatives. Neither SSA
nor DHS is able to easily and quickly update work status because they
lack a common identifier for their records. Updating status without a
common identifier may not be practical because different spellings or
name variations confound large-scale matching efforts. For example, an
August 2005 report from the SSA's Office of the Inspector General
highlights a substantial proportion of cases in which names were
inconsistent between SSA and DHS. In at least six reports in recent
years, SSA's Office of the Inspector General has recommended or
mentioned prior recommendations that SSA work with DHS to update
information about work authorization. SSA officials maintain that it is
their policy to make changes to the Social Security record only if the
SSN holder initiates the changes and provides evidentiary documents
from DHS. SSA further states that a ``resolution of the discrepant
information between DHS and SSA would require more than a simple
verification.''
Despite the many problems with the data, there are steps that could
be taken to improve them. For example, the employers who submit the
most earnings reports for nonwork SSNs might be good candidates for
outreach and education about verifying work eligibility. SSA's Office
of the Inspector General officials suggested that DHS send letters to
employers of persons with nonwork SSNs. These letters could encourage
persons listed as having nonwork SSNs, who are now authorized to work,
to update their records. The ESF also has the potential to provide
useful information to DHS, but this information has protected tax
status. Although some of the same difficulties that pertain to the
Nonwork Alien File could also affect the usefulness of the ESF to DHS
enforcement efforts, if these challenges could be overcome, authorizing
transmittal of at least some of the ESF information to DHS might be
warranted.
Producing accurate, useful data will require substantial continued
effort on the part of SSA, DHS, and the IRS: these efforts will be of
little value, however, if the data are not used for enforcement and to
stimulate changes in employer and employee behavior. We have reported
previously that the IRS program of employer penalties is weak, because
of limited requirements on employers to verify and report accurate
worker names and SSNs; we have recommended that IRS consider
strengthening employer requirements, a course that could over time
improve the accuracy of wage data reported to SSA. We have also
reported that, consistent with DHS's primary mission in the post-
September 11 environment, DHS enforcement resources have focused mainly
on critical infrastructure industries in preference to general worksite
enforcement. In such circumstances, coordination to leverage
usable and useful SSA data is essential to ensure that limited DHS
worksite enforcement resources are targeted effectively.
Conclusing Observations
The federal government likely can make use of information it
already has to better support enforcement of immigration, work
authorization and tax laws. The Earnings Suspense and the Nonwork Alien
files have potential, but even the best information will not make a
difference if the relevant federal agencies do not have credible
enforcement programs. In fact, sharing earnings data to identify
potential unauthorized workers could unnecessarily disclose sensitive
taxpayer information if the data are not utilized by enforcement
programs. To address unauthorized work more meaningfully, IRS, DHS and
SSA need to work together to improve employer reporting, develop more
usable and useful data sets for suspicious earnings reports, and better
target limited enforcement resources. We look forward to contributing
to this endeavor as we continue to conduct our work on using SSA data
to help reduce unauthorized work.
This concludes my prepared statement. I will be happy to answer any
questions you may have.
Chairman MCCRERY. Thank you, Ms. Bovbjerg. To both of you,
you both mentioned in your testimony how the recent trends in
the ESF seems to indicate an increase in illegal work and SSN
fraud and misuse. I wonder if I can get you to expound upon
that a little bit. You have obviously, both offices, done
extensive examination of the composition of the ESF. Can you,
for example, describe the characteristics of employers with the
largest number or highest percentage of wage reports in the
ESF, or the characteristics of employees whose earnings are in
the ESF?
Mr. O'CARROLL. I will respond first. What has come out in
previous testimony is that sort of the trends that we are
coming up with are that the three employment groups with the
largest number of wage reports in the ESF are the service
industry, the restaurant industry, and the agriculture
industry.
In one of our previous testimonies, we indicated that the
states with the most wage reports in the ESF are California,
Texas, and Illinois. What we are finding is that about the same
number of wage reports go into the ESF every year, which is
about 9 million reports. Although the number of wage reports
going into the ESF is level over the last several years, we are
finding that the number of problem employers is increasing.
Therefore, although we have identified these problem employers,
they keep posting more and more wage reports into the ESF,
which is problematic.
Ms. BOVBJERG. We took a little different cut at the ESF. We
looked at records between 1985 and the year 2000. There were 85
million records. We found certain types of errors come up all
the time. Nine million of the records had SSNs of all zeros.
For 3.5 million of the records, employers used the same SSN for
multiple workers in the same year. One and half million had
SSNs had never been issued. There were a lot of these types of
problems. We found an industry concentration similar to the IG
findings we saw eating and drinking establishments, and, we
found construction was the second largest industry in the group
of records that we looked at. We also found that 8,900
employers--this is out of the 6 million who send information
annually to SSA--8,900 were responsible for more than 30
percent of the ESF records we reviewed.
The reason that we think that there could be more
unauthorized work coming into the ESF is that we looked at
reinstatements. You really can't tell from looking at the ESF
records where people were born and who they are. That
information wouldn't be in the ESF. You can tell something by
looking at information on those records that were reinstated to
someone's Social Security account. We looked at 265 numbers
that came up more than a thousand times in the period that we
examined.
Of those, there were 13 million reinstatements to almost 12
million different people on these most frequently used numbers.
What we found was that in 1986, about 8 percent of those people
who received reinstatements were foreign-born. The vast
majority was U.S.-born. By 2000, the majority was still U.S.-
born, but we were up to about 20 percent of the reinstates
being foreign-born. Of those, almost half involved earnings
received prior to the individual getting a work authorized SSN.
We thought that while it is a tremendous exaggeration to say
that the ESF represents unauthorized work, I think it is fair
to say that there is an increase in mismatches that are the
result of unauthorized work.
Chairman MCCRERY. Thank you. Ms. Bovbjerg, you are familiar
with, I am sure, the bill that the House recently passed. It
hasn't passed the Senate, so it is not law, just a House-passed
bill. That bill would require employers to verify SSNs and
employment eligibility through an electronic system modeled on
the Basic Pilot program.
Your organization, the GAO, though, in a 2005 report stated
that the Basic Pilot program has some serious weaknesses. It
does not detect identify theft. The DHS databases are not up to
date. Employers may use the verification service to engage in
discriminatory practices, and verifications may be delayed if
system use increases substantially. Based on the GAO's
research, if the Basic Pilot were to be made mandatory, as
under the provisions of the House bill, would this system have
the capacity to handle some 6 million employers in this
country?
Ms. BOVBJERG. We have some concern about that. When we did
that work last year and looked at the processes at DHS, one of
our recommendations was to assess the feasibility and cost of
correcting the weaknesses in the Basic Pilot. This is a
recommendation that the Department has accepted and said that
they will pursue. Simply doing that is a big job. Making sure
that those things are corrected is an even bigger job. I don't
know whether they will be ready or not, but it would be
something that I think DHS should be concerned about. SSA,
however, says that they are ready for their part in a mandatory
Basic Pilot.
Chairman MCCRERY. How many employers now are covered under
the Basic Pilot?
Mr. O'CARROLL. I have that figure. About 8,000 employers
are under the Basic Pilot.
Chairman MCCRERY. Eight thousand.
Mr. O'CARROLL. Out of 6.5 million employers.
Chairman MCCRERY. Eight thousand. We go from 8,000 to 6.5
million. Have you have any thoughts on if the Basic Pilot were
made mandatory, would we see an increase in the use of
counterfeit documents, like the SSN card or would we see an
increase in identity theft, because people would know that they
are being checked?
Ms. BOVBJERG. If everything is up and running, and we are--
we as a government--are able to run a verification process like
that----
Chairman MCCRERY. Right.
Ms. BOVBJERG. --I think it would undermine the value of the
fake identity information. You would have to have a working
system with a credible enforcement program behind it.
Chairman MCCRERY. Which may involve changes to the SSN card
itself, to make it tamper proof or less subject to theft, or--
--
Ms. BOVBJERG. It depends really on what kind of role that
the Social Security card would have in the whole I-9 process,
which I know is under review at DHS.
Chairman MCCRERY. Are you concerned that we are not ready
as a government to move forward with making this program
mandatory for all employers?
Ms. BOVBJERG. I always like to try things out before we go
to a full implementation, and I know we have been running the
Basic Pilot as a pilot program. I think what we found is that a
significant portion of the verifications have to be done by
hand. That concerns me for opening it up to 6 million
employers. Does that mean we can't do it? No. I think it means
that we would have to really plan how we go forward and how
long it is going to take to be ready to do that. I would be
concerned if we went ahead with a mandatory verification where
the government is not really prepared to provide the
verifications that are required.
Chairman MCCRERY. Mr. O'Carroll, do you have any thoughts
on this?
Mr. O'CARROLL. I concur. The reason we endorse pilots is to
test a process to see how it is working. As I noted before,
what we are getting from employers in terms of the Basic Pilot
from our surveys is that employers like it. They feel it is
working well. It is getting a great response. I think our
responsibility and the GAO's responsibility is to monitor these
pilots; give them some time to work out; and then report back.
We have been working on surveys in relation to the Basic Pilot,
and in relation to SSNVS to get more information for the
Subcommittee as to the viability of rolling the Basic Pilot out
to all 6.5 million employers.
Chairman MCCRERY. Okay. Thank you. Mr. Lewis.
Mr. LEWIS OF GEORGIA. Thank you, Mr. Chairman. Ms.
Bovbjerg, your testimony implies that you think that the IRS
should share tax return information with DHS. Are you saying or
suggesting that the law should be changed?
Ms. BOVBJERG. I am not ready to suggest that today. We have
work underway for these Subcommittees looking at the Non-Work
Alien File and how useful that might truly be to DHS
enforcement efforts and what alternatives exist. Certainly the
Earnings ESF could be an alternative, and it is something that
we will also look at. I would say that even if there are data
that could help DHS, if DHS is not ready to use that
information in a credible enforcement program, that would not
meet our criteria for providing tax access.
Mr. LEWIS OF GEORGIA. Do you happen to know the views or
the position of the Comptroller General?
Ms. BOVBJERG. On this particular issue?
Mr. LEWIS OF GEORGIA. Right.
Ms. BOVBJERG. I do not. I have not spoken to him directly
on this exact issue. I know that when we ask for 6103 authority
ourselves, we only do it when we are positive that we need
access to that information to do something in particular that
we have already figured out what we are going to do. I am just
a little concerned about going forward and saying DHS needs
this information. When I am not sure they are ready to use it
in an enforcement program.
Mr. LEWIS OF GEORGIA. Thank you very much. Mr. O'Carroll,
do you believe employers should have a greater responsibility
to verify the identity, SSN, and immigration status of their
employees? Where should the burden be?
Mr. O'CARROLL. Mr. Lewis, I believe that employers do have
such a responsibility. For example, we have noted in one of our
audits that a certain employers are reporting the same SSN for
900 different employees. There are trends, and I think that is
the important part.
Mr. LEWIS OF GEORGIA. Let me--you are saying a certain
employer----
Mr. O'CARROLL. Yes. One employer.
Mr. LEWIS OF GEORGIA. One--the same SSN----
Mr. O'CARROLL. Nine hundred times.
Mr. LEWIS OF GEORGIA. Is that widespread or just one of the
tools?
Mr. O'CARROLL. I am using that as an egregious example, Mr.
Lewis. What we are also finding is that certain employers are
using sequential SSNs numerous times. They will submit an SSN
for an employee. Then for the next employee, use the next SSN
in the sequence. There are egregious employers out there. We
think that it should be brought to their attention that they
are incorrectly reporting the SSNs so that they can take
corrective actions.
Mr. LEWIS OF GEORGIA. Are you prepared today to make any
particular recommendation for additional employer
responsibility? If so, who supports your position?
Mr. O'CARROLL. I believe what we noticed from the first
panel today was that we have got three agencies that have equal
concerns in terms of information that is being supplied by the
employers. Each one has mentioned it in one way, shape, or
form. We all have concerns as to the information we are getting
from employers and we need to have methods to encourage
employers to verify the SSNs they are reporting. Yes, I think
that employers should--the laws that we have now should be used
to force employers use better scrutiny in terms of the SSNs
they are reporting.
Mr. LEWIS OF GEORGIA. Thank you very much. Thank you, Mr.
Chairman.
Chairman MCCRERY. Mr. Ramstad.
Chairman RAMSTAD. Thank you, Mr. Chairman. I want to thank
both the witnesses for their testimony. Director Bovbjerg?
Ms. BOVBJERG. Bovbjerg.
Chairman RAMSTAD. Bovbjerg. I would like to ask you a
question, if I may please? The GAO's 2005 report on immigration
enforcement, are you familiar with that report?
Ms. BOVBJERG. Yes, I am.
Chairman RAMSTAD. The report found that the number of
notices of intent to fine, as well as worksite enforcement
arrests, by DHS had decreased considerably since 1999 in that
6-year period. In fact, the report found that worksite
enforcement arrests had declined by 84 percent between 1999 and
2003. Shouldn't we be concerned with this lack of enforcement
and since the GAO released its report last year, have you
noticed any changes or improvements made by DHS in fulfilling
its responsibilities?
Ms. BOVBJERG. We know that what we were told about the drop
off in the intention to fine and in the arrests had to do with
not only a shift of focus to the anti-terrorism efforts that
Secretary Baker spoke about in critical infrastructure areas;
airports; power plants; and so on, that the agency is also
looking at alternatives to making arrests and fines; that they
are looking more at civil settlements as a way of more
effective use of their resources.
Whether they have taken actions that would change that
approach I do not know. Our report was released at the end of
the summer, in August, so there hasn't been a lot of time for
DHS response to it.
I do think that DHS has been very clear with us that there
is a shift in priorities. They have limited enforcement
resources, and we--in always looking at any kind of
enforcement--I look at pension enforcement, too--we always say
it is better to target the limited resources that you have.
I think the question here is it only critical
infrastructure enforcement that the Congress wants to see or
does the Congress want to see a more general worksite
enforcement, in which case those priorities would need to be
reordered.
Chairman RAMSTAD. Doesn't that mean enforcement is
essentially a joke? An 84 percent decrease. I understand the
reordering of priorities, but I also understand the laws and
the regulations, and it seems to me that we shouldn't be
picking and choosing which laws to enforce. You haven't really
seen any changes or improvements by DHS in this regard since
that report; is that a correct statement?
Ms. BOVBJERG. I cannot really answer that question because
I am not an expert on the immigration issue.
Chairman RAMSTAD. I understand. Let me ask you for the
remaining minute or two I have, IG O'Carroll, about information
sharing between SSA and DHS. I know in a 2001 report, the SSA
IG recommended that SSA collaborate with INS, which, of course,
was then incorporated in DHS, to develop a better understanding
of the extent that immigration issues contribute to SSN misuse
and the growth of the ESF. Also, the SSA IG recommended that
the SSA, reevaluate its application of existing disclosure laws
or come to Congress for legislative authority to remove
barriers that pertain to information sharing.
Given the fact that this information sharing issue has been
studied exhaustively I know by the SSA IG and so forth, do you
have any conclusion or observations as to which data would you
recommend SSA share with DHS?
Mr. O'CARROLL. Yes, Chairman Ramstad. There is some very
basic information that I believe would be useful, and it ties
into my answer to Mr. Lewis. We have information on chronically
bad employers, the ones that are hiring the vast majority of
employees posting bad wages or using bad SSNs to post their
employees wage reports. We feel that that is important that we
should be able to inform those employers that one, we will be
employing and notifying DHS of the trends in that employment
industry, and the most egregious employers that are involved in
the industry and posting bad wage reports and two, as part of
SSA's employer outreach programs and let them know that they
are one of the worst violators in forms of the posting bad
wages reports. I think that would have a very positive effect
in terms of the education of employers as well as enforcement.
Chairman RAMSTAD. Again, I want to thank both the
witnesses.
Chairman MCCRERY. Ms. Tubbs Jones.
Ms. TUBBS JONES. Thank you, Mr. Chairman. I always have to
take myself back to other jobs when I start thinking about some
of this. When I first became the elected DA in Cuyahoga County,
Ohio, we had no computer system connecting the prosecutor, the
courts, the sheriff. It was the craziest thing, and I sat and
said, it can't be that all these smart people can't figure out
what they are supposed to do with all this information.
I am stunned in your statement--I think it is Ms.
Bovbjerg's statement--let me check and make sure before I--no,
I am sorry--Mr. O'Carroll's statement at page 5, you say while
SSA and DHS have extensive information at their disposal, they
have been unable to find a way to work with the information to
prevent, detect, and enforce unauthorized employment.
How many people do you have allocated to figuring out a way
you work with all this information to get an answer?
Mr. O'CARROLL. Being in the IG's office, we have made
recommendations to SSA and to DHS to work those issues out.
What was stated in the earlier testimony this morning from DHS
is that they have problems with the SSA information they are
given. For example, SSA tracks the individuals by their SSN,
while DHS indicated that it tracks the individual by their
Alien Number. Because of that, they have had difficulties in
matching the SSA information.
We have made numerous recommendations asking for the two
agencies to work with each other. I agree with you,
Congresswoman Tubbs Jones, I think technology has caught up to
a point now that with the other information that is in that
file, even though one agency tracks under one number, and
another agency tracks under a different number, that they
should be able to find a commonality to be able to identify
which person is which, and pick up the trends. It ties in with
what my colleagues from GAO have found that there is a lot of
useful information that is going over to DHS that they can be
using for their trend analysis if they have inclination to use
the available computer technology to be able to make that
information viable.
Ms. TUBBS JONES. The money that comes from--okay. I am an
employee, and I am in an ESF. The dollars, the FICA dollars
that I pay, where do they sit? Do they collect interest? What
happens with those dollars if I am in the ESF mode? The
employer had to pay it, whether it was right or wrong; right?
Ms. BOVBJERG. Yes. We--the government have already spent
that money. It is just cash into the Treasury.
Ms. TUBBS JONES. It is just cash into the Treasury?
Ms. BOVBJERG. Yes. Yes. The record of that contribution of
yours--SSA doesn't know it is yours, or it wouldn't be in the
ESF.
Ms. TUBBS JONES. Right. Understand.
Ms. BOVBJERG. It is still there, with your earnings record.
Ms. TUBBS JONES. What would you--what is your
recommendation? Take your--can you take your hat off as an
employee of the Federal Government----
Ms. BOVBJERG. Never.
Ms. TUBBS JONES. --let's see. I give you immunity. With
what the heck should we be doing? This is outrageous that we
can't work out a system in which to address this. I am big on
privacy. I don't want you to invade my privacy, and I have
already claimed that my SSN is used for everything but my
Social Security. What would you do? You have been in this
business a long time. Let us figure it out. What can we do? I
have got probably 2 minutes, so each of you get a minute left.
Ms. BOVBJERG. Okay. Well, I will talk fast. I can never
take my GAO hat off.
Ms. TUBBS JONES. Okay. Pretend. I want to put another hat
on top of the GAO hat. Consultant to the Subcommittee on Social
Security.
Ms. BOVBJERG. We have said before that we need to improve
the data that are reported at the worksite; that that would
help SSA. It would also help discourage unauthorized work.
Ms. TUBBS JONES. Then better thing we need to do is have
one location? If you want to go work for ABC Company, you come
to this location. You give us the information, and we send all
that information to ABC company, then we already have a place
where we collect all the information about workers. Has anybody
ever thought about that?
Ms. BOVBJERG. Well, in some ways, a verification system----
Ms. TUBBS JONES. The lady behind you is frowning. Come on
you can tell me.
Ms. BOVBJERG. --in some ways a verification system that
does go to SSA and DHS is going to a central repository.
I think that really what I am talking about is that we have
not established a credible system of penalizing employers for
misreporting. That is something that the IRS is working on I
understand. That is something that they need to work on with
SSA and DHS. It is not only a tax issue, and it is something
that would help reduce suspense file mismatches. It is very
fundamental. The other side is that we need to devote some
resources, whether existing resources or additional resources I
don't know, but we need to devote some resources to general
worksite enforcement at DHS.
Ms. TUBBS JONES. Begging your indulgence, Mr. Chairman, can
I get a 1-minute response from Mr. O'Carroll?
Mr. O'CARROLL. Probably the most valuable lesson that I
learned from the first panel today was when the Commissioner of
IRS asked for 1 year to come back and report to you to see what
has changed in that year. One of those things I would like to
see changed in that year is that IRS would use their
enforcement capabilities to penalize the employers that are
chronically misreporting wage information.
The other thing that I would like to see happen in this
year regarding the information that we have been giving to DHS,
which is identifying problem employers for non-work aliens
would be, for DHS to initiate some action on the information.
Hopefully, in my tenure as the IG, we will see that these three
agencies are talking to each other and that we get synonymous
databases where we can all be working off of the same
information.
Ms. TUBBS JONES. My guess is the employers know what a hard
time we are having trying to figure this out, and they said,
the heck with y'all. We will just go on and do our thing, and
when you all catch up with us, we will have gotten our workers,
made our money, and probably gone bankrupt or whatever.
Thank you, Mr. Chairman.
Chairman MCCRERY. You are quite welcome. Mr. Levin.
Mr. LEVIN. Thank you. I am sorry I was at another meeting,
and I missed the testimony. I guess I think I know enough about
it to ask a couple quick questions. Your comment about wishing
that we would penalize employers for false information more
effectively. This has been an issue we have been discussing for
a long time. The assumption underlying that statement is that
in many cases, we know enough, we have enough information, to
put to employers who are not meeting the law. Is that a correct
statement?
Ms. BOVBJERG. In my belief, we do. The reasonable cause
standard that the IRS uses is waived if there is intentional
disregard. I still do not understand why intentional disregard
is not used more frequently because, as Mr. O'Carroll reported,
we have employers who time after time after time use the same
SSN for all their employees. That is a little different I would
submit than goofing up and mis-reporting once.
Mr. LEVIN. I think it is important for us to take that into
account because if the focus is mainly on the data, we may not
understand the full picture, because what you are saying is in
many cases where we have the data, and much of it relates to a
smaller number of states, and I think you testified a
relatively small number of companies, there hasn't been
effective action vis a vis those companies.
Secondly, if all this data pours in, how do you think it is
disaggregated by DHS so that they can go after their main
target and that is potential terrorists? Has anyone figured out
what the relationship would be between more data available to
DHS and the implementation of their basic function?
Ms. BOVBJERG. That is a concern we have, and that is
something that we are going to look at as part of the work that
we are doing for the Subcommittees on the non-work alien file
and other sources of data that might be useful to DHS.
Mr. LEVIN. Okay. Thank you, Mr. Chairman.
Chairman MCCRERY. Thank you, Mr. Levin. Thank you, Mr.
Ramstad, Mr. Lewis, and thank you, Mr. O'Carroll and Ms.
Bovbjerg, very much for your testimony. This is an issue that
does require I think a lot of thought, and we are looking
forward to receiving at some point from the Administration some
concrete proposals as to how to tighten this system to say the
least. Thank you very much.
Ms. BOVBJERG. Let us know if we can help.
Chairman MCCRERY. The hearing is adjourned.
[Whereupon, at 12:43 p.m., the Subcommittee was adjourned.]
[Questions submitted by Chairman McCrery to the Honorable
James B. Lockhart and his responses follow:]
Question: The SSA sends letters to employers who report more than
10 W-2s with a name/SSN mismatches, representing at least one-half of
one percent of all W-2s, reported by the employer. The SSA also sends a
letter to each employee who has earnings with a name/SSN mismatch. What
is the impact of these letters on removing wage reports from the
earnings suspense file?
Answer: The SSA has ongoing efforts, such as the No Match Letter
and the Social Security Statement, that provide individuals with an
opportunity to review and correct their earnings records. In addition
to SSA's initiatives, a worker may discover an error in his/her
earnings when s/he gets a Form W-2 with incorrect information, or even
when the IRS withholds an expected income tax refund. Once an error is
identified, there are several ways the worker can notify SSA to correct
the earnings record. However, we cannot quantify the number of wage
reports removed from the earnings suspense file as a result of any one
of these ongoing efforts.
As noted, the employer and employee No Match letters are one way
SSA tries to notify a worker of the possibility of errors in his/her
Social Security record. Letters sent to employees include a scannable
form on which the worker may submit corrections to SSA. For tax year
(TY) 2003, we removed 206,000 records from the earnings suspense file
based on these scannable forms. We cannot tell how many records were
corrected by employees contacting SSA in another way, for example by
contacting a local filed office.
Similarly, the employer No Match letter asks employers to submit a
corrected Form W-2 if the original information that the employer
submitted was incorrect. Our best proxy for gauging responses to the
employer no match letter is the number of corrected Forms W-2 (W-2C)
SSA receives that correct only name and/or SSN. For TY 2003, we
received 241,000 such corrected W-2s. However, of those, approximately
196,000 provided corrected information on wage items SSA had already
been able to correct and post to the worker's record. Generally, this
occurs because the employee No Match is sent prior to the employer's No
Match letter, allowing the employee to take action to correct his/her
record before the employer submits a Form W-2C. Fewer than 7,000
records were actually removed from the suspense file as a result of
corrected Forms W-2. The remaining Forms W-2C submitted did not provide
correct information.
It should be noted that, in some cases, the employee's information
on the submitted Form W-2 is more current than the information in SSA's
records (for example, when an employee gives her married name to her
employer but has never notified SSA to report her legal name change).
It is the employee's responsibility to update his or her information
with SSA. Once SSA's records have been updated to reflect the most
current information, the wages can be posted to the individual's
record. A corrected Form W-2 is not needed.
Question: In 2002, rather than send letters to employers with more
than 10 W-2s with name/SSN mismatches, SSA sent letters to each
employer with even one W-2 with a name/SSN mismatch. Why did SSA not
continue that policy?
Answer: In calendar year 2001 (Tax Year (TY) 2000), SSA sent
109,157 letters to employers. In calendar 2002 (TY 2001), SSA sent
950,000 letters to employers. Every employer with even one name/SSN
combination that did not match SSA records received a letter. In
evaluating the effectiveness of this activity, we determined that the
total cost to SSA, including the cost of producing and mailing the
letters and handling follow-up calls to employers, was approximately
$1.3 million. For reasons discussed above, we estimate that only about
35,000 items were actually removed from the suspense file. As a result,
SSA determined that sending letters to all employers with W-2s that
could not be posted was disruptive and not a cost-effective use of
resources. In calendar year 2003 (TY 2002), SSA instituted our current
threshold for sending employer No Match letters, sending 126,000 such
letters to employers. However, though the number of letters was greatly
reduced, the No Match letters that were sent to employers covered 7.6
million out of a total of 9.8 million mismatches, at a savings of
approximately $1 million from the previous year. In addition, employers
received 1.9 million individual letters for employees, for whom we did
not have valid addresses.
Question: Several bills introduced this Congress would require
employers to verify the employment eligibility of new hires through a
database that combines data from the SSA's SSN applications and DHS's
immigration records. Currently, in the Basic Pilot program, the two
sources of data are kept separate, and each agency independently
verifies the information without sharing it with the other agency. Is
there any particular advantage or disadvantage to combining the
databases? Would it increase the accuracy of the data? Would it
increase the speed of verifications? Would it improve program
administration? What effect might it have on the privacy of personal
information?
Answer: The Basic Pilot Program matches the information submitted
by an employer against the information in SSA databases and DHS
databases. Each agency maintains the data necessary for the
administration of its programs. By specializing, each agency focuses on
its respective primary mission. Each must be responsible for its own
business processes, including the collection, integrity and accuracy of
certain information. If these databases were to be combined, one agency
would be burdened with the management of data which it does not
collect, cannot verify and which is not related to its business
purposes. Also, it would require additional resources for that agency.
Further, a combined data base would be less accurate than two separate
data bases since combining the data would involve transmitting updated
information from the source data base. At any point in time, some data
on the combined data base would be out of sync with the source data
base that contains the most current information.
Since the current process is online, the increase in the speed of
verifications would probably be negligible. Creating a database
maintained by one agency might well increase the length of time to
correct information because each agency would retain the applicable
business process to ensure that policy was followed in entering and/or
correcting the data.
With regard to the effect on the privacy of personal information,
combining the databases could undermine certain privacy interests
currently recognized in the Privacy Act 1974 (P.L. 93-579). For
example, the Privacy Act protects the principle of minimization, which
ensures that agencies retain only such information necessary to
accomplish a program mission. In addition, the Privacy Act also
suggests that information be collected to the extent possible from the
subject of the record, as opposed to other sources such as Federal
agencies. However, if Federal statute required combining the databases,
every effort would be made to assure that the newly created system of
records would conform to Privacy Act principles and standards for
security, just as the separate databases are protected today.
Question: In a 2001 report, Obstacles to Reducing SSN Misuse in the
Agriculture Industry, the SSA IG recommended proposing legislation that
would provide SSA with authority to require chronic problem employers
to use the Agency's SSN verification services. At the time, SSA
disagreed, saying the IRS already had authority to penalize employers
who do not comply with wage reporting requirements. However, as the IRS
has no record of penalizing even employers with high name/SSN mismatch
rates in their wage reports, would SSA rethink its position?
Answer: We continue to believe that the ability to impose sanctions
on employers who fail to provide matched names and SSNs for their
employees should be the sole responsibility of the IRS. Sanctions
against employers serve as a tool to obtain compliance with employment
tax withholding and reporting requirements which are under the
jurisdiction of the IRS. Unlike the IRS, SSA does not have the tools to
enforce a compliance program against employers. Attempting to establish
such a program within SSA would take resources away from SSA's primary
mission and could adversely affect public trust and confidence in the
program.
We note that the Administration recognizes worksite enforcement as
a critical component of comprehensive immigration reform, and it
supports mandating an employment eligibility verification system in a
manner that is not overly burdensome to employers. The Administration
looks forward to working with Congress to ensure that implementation of
such a system makes efficient use of technology, is operationally
effective, and gives employers the tools they need to verify work
eligibility quickly and accurately.
Question: In a February 2005 report, GAO said that SSN verification
services for paper or phone requests require the worker's date of
birth, but that electronic requests do not. Why is the date of birth
required only for verification through certain media? Would correcting
this inconsistency in SSN verification services help prevent
individuals from using the SSNs of children to engage in unauthorized
work?
Answer: The SSA has always offered name/SSN verification services
to employers to ensure that an employee's name/SSN matches for wage
reporting purposes. The telephone and paper listing versions of the
Employee Verification Service, and our Field Office procedures, have
been in use for many years, and require four fields for verification:
name, SSN, date of birth (DOB), and gender.
SSA's new SSNVS was designed as a quicker and more convenient
verification service for employers. During its development, we obtained
input from potential users. Employers advised SSA that requiring DOB
and gender presented an additional, and perhaps unnecessary, burden,
since this information is not needed for wage reporting and is not
included on the Form W-2. In response to that feedback, SSA designed
SSNVS to include the DOB and gender as optional fields to help
employers to distinguish between, for example, two Pat Smiths.
The SSA did not change the other verification services which
require the DOB and gender field when SSNVS was developed. However, we
continue to examine the requirements in our verification systems to
determine whether changes may be needed.
Question: The SSA requires employers to register to use the
Agency's SSN verification services if the employer is requesting more
than 50 verifications, or any number of verifications using magnetic
media. Therefore, employers calling the Agency's toll-free 1-800 number
to verify up to five names and SSNs are not required to register, nor
is anybody requesting verification of up to 50 names by submitting the
request on paper. What does the registration agreement require of
employers? Why does the Agency have different registration requirements
based on the number of requests and the media used, especially since
the GAO noted in February 2005 report that some SSA officials believe
that some larger employers with significant turnover have dedicated
staff whose job is to call the 1-800 number throughout the day to
bypass the five-worker per call verification limit?
Answer: Through our toll-free numbers, SSA offers Employee
Verification Service (EVS) for up to five name/SSN combinations at a
time. For purposes of this activity, the employer's EIN (Employer
ldentification Number) is verified, but we do not require registration.
In addition, up to 50 name/SSN combinations can be submitted on paper
to our local field offices for EVS. Again, registration is not
required.
For large scale EVS requests, that is, over 50 name/SSN
combinations, a registration process is required. To register for EVS,
employers must complete a registration form and have it signed by a
manager or authorized official of the company. The title of the signer
must follow the signature. The employer must also sign and date a
Federal privacy act statement. These forms (and explicit instructions)
are available in the Employee Verification Service Handbook at http://
www.ssa.gov/employer/ssnvadditional.htm The registration form and the
privacy act statement must be mailed or faxed to SSA. Once SSA has
processed the registration request, SSA mails the employer a Requester
ldentification Code. This code must be displayed on the paper or
magnetic media submission and on any EVS correspondence with SSA.
The Federal Privacy Act Statement makes it clear that anyone who
obtains SSN verification information under false pretenses, or uses it
for a purpose other than for which it was requested, may be punished by
fine, imprisonment or both. It also makes it clear that any employer
that uses the information SSA provides regarding name/SSN verification
as a pretext for taking adverse action against an employee may violate
state or Federal law and be subject to legal consequences.
We are studying the issue you raise regarding different
registration requirements to determine whether procedures are needed to
advise employers calling the 800 number of the sensitivity of the
verification information they are requesting and the importance of
using it carefully.
Question: The SSA currently does not have authority to pursue civil
or criminal penalties for employers who submit wage reports with name/
SSN mismatches. Similarly, SSA does not have the authority to require
employers with a high number of percentage of name/SSN mismatches in
their wage reports to confirm employees' information using the Agency's
verification services. Would you recommend that Congress give SSA such
authority? If Congress were to give such authority to SSA, how might
the Office of the Inspector General utilize it? Could you provide your
recommendations for specifying such authority?
Answer: Currently, the U.S. Department of the Treasury and,
specifically, the IRS have enforcement authority over employers with
respect to the submission of wage reports and payment of employment and
income taxes both for the employer and the employee.
The SSA processes wage reports (W-2s) as an agent for the IRS.
These tax documents are submitted each year by employers. The IRS is
aware of any errors in these reports. The IRS has full enforcement
authority over employers with regard to the submission of erroneous tax
information, including the submission of erroneous W-2s. In addition,
DHS has sole authority to enforce worksite compliance with immigration
laws.
The SSA is not an enforcement agency. The SSA IG does investigate
cases where, for example, individuals defraud the Social Security
system of funds or submit false information in order to claim benefits.
Any information developed by the IG is then turned over to appropriate
SSA employees or to a U.S. attorney for appropriate action. However,
SSA does not have expertise in enforcement of tax reporting
requirements. Before making such a fundamental change in SSA's mission
from that of a benefit paying agency to tax reporting enforcement
agency with concurrent jurisdiction with IRS, I believe Congress would
want to carefully consider the impact of such a change on SSA
priorities and costs. Such a change would alter the perception of the
Agency in the eyes of the public as well as diminish the enforcement
effectiveness of the IRS and DHS.
Question: The Commissioner of the IRS expressed concern in his
testimony about the effect of increased enforcement of wage reporting
accuracy on tax compliance. What are your thoughts on the potential
implications for your Social Security's finances? In other words, do
you believe increased enforcement would result in more payroll taxes
being collected, or less? Also, please provide any information you have
on the effect of non-payment of payroll taxes on the wages of tax
paying workers. In other words, if employers can hire employees while
avoiding payroll taxes, does that depress wages for all employees?
Answer: By law, the OASDl trust funds are ultimately credited with
amounts reflecting tax liability due for all wages in OASDl covered
employment reported by employers on Forms 941 and W2 (and not with
amounts actually collected). The IRS and SSA have programs in place to
resolve inconsistencies in total wages reported by employers on the
forms. Hence, an increase in enforcement of wage reporting accuracy on
employers would influence OASDl revenue only to the extent that it
affects the amount and timing of wages reported by employers.
With regard to whether increased enforcement activity in this area
would result in a decrease in wage reporting and therefore a decrease
in wage tax receipts, SSA would defer to the expertise of the IRS in
evaluating the impacts of this type of change on wage reporting and tax
compliance.
The SSA would defer to IRS and the U.S. Department of Labor with
respect to the impact of nonpayment of payroll taxes on the wages of
taxpaying workers.
Question: The Immigration Reform and Control Act (IRCA) of 1986
(P.L. 99-603) prohibited the hiring of illegal alliens and mandated
fines for violators. Why then are employers not permitted to use the
SSA's SSN verification services to screen potential workers before they
are hired? Would it require a change in law to allow employers to use
the SSA's SSN verification services to verify information on potential
hires? What would Congress need to do to be sure that applicants are
screened before they start working?
Answer: There would need to be a change in law in order for SSA to
verify information on potential hires. Under existing law, the purpose
for which SSA verifies SSNs for employers is not for employment
verification purposes. The only system that verifies work authorization
is the Basic Pilot. SSA's employee verification service is for employer
wage reporting purposes under the provisions of section 232 of the
Social Security Act (P.L. 74-271). In these situations, there is an
established relationship between the employers and the individuals.
Under the Privacy Act 1974 (P.L. 93-579) routine use provision (5
U.S.C. 552a (b)(3)), SSA may disclose information for a purpose which
is compatible with the purpose for which we collect and maintain
information. SSA's disclosure regulations that implement the Privacy
Act (20 C.F.R. 401.150) provide that we may disclose information
where necessary to carry out SSA's programs. Under the Social Security
Act, SSA collects enumeration information in order to assign SSNs so
that SSA can post wage credits to the appropriate worker. The SSA
verifies SSNs for employers solely for the purpose of accurately
completing the Internal Revenue service's Forms W-2 (Wage and Tax
Statement). Forms W-2s are submitted to SSA for the purpose of posting
earnings to an individual's record, which will be used to determine
future Social Security benefits. Absent a change in law, SSA lacks
authority under the Privacy Act to disclose the information prior to
the creation of the employer-employee relationship.
Concerning SSN verification for 'potential' employees (e.g., when
an individual has filed an application for employment but the employer
has not made a commitment to hire hirnlher), we note that there is no
established relationship between the employer and the individual, i.e.,
there is no basis to assume that the employer will hire and submit a
wage report for himlher. Thus, the employer has no need to verify the
SSN for wage reporting purposes. In such cases, we cannot establish the
requisite Privacy Act and regulatory compatibility criteria to justify
verifying SSNs for the employer. In addition, our understanding is that
individuals are not required to complete the Form 1-9 (which requires
their SSNs) until after they are hired. Pertinent language on the 1-9
form indicates that it is ``To be completed and signed by the employee
the time employment begins.'' (Our emphasis.) We believe a change in
law may be necessary in order to verify the SSN before the person is
hired.
An employer may use DHS' Basic Pilot or SSA's SSNVS services
immediately after hiring an individual. If the employer submits
information about an employee that does not match information in DHS or
SSA records, the employers should ask the employee to contact SSA and/
or DHS to correct its records.
[Questions submitted by Chairman McCrery to the Honorable Patrick
P. O'Carroll and his responses follow:]
Question: In a 2001 report, the SSA IG recommended that SSA
collaborate with the U.S. Immigration and Naturalization Service (INS)
(which was incorporated into DHS to develop a better understanding of
the extent to which immigration issues contribute to SSN misuse and
growth of the ESF. Also, the SSA IG recommended that SSA reevaluate its
applications of existing disclosure laws or seek legislative authority
to remove barriers that would allow the Agency to share information
regarding chronic problem employers with the INS. Given that the SSA IG
has extensively studied the ESF, what data would you recommend SSA
share with the DHS?
Answer: The SSA has information related to suspended wages,
including information reported by the employer during the Annual Wage
Reporting process and information provided by the IRS. As part of the
Agency's efforts to resolve employee name and SSN discrepancies, SSA
places suspended wage data into a Decentralized Correspondence (DECOR)
mailer file so notices can be sent to employees and employers. This
information includes:
Employee's name as reported on the Wage and Tax Statement
(Form W-2);
Employee's SSN as reported on the W-2;
Employee's address as reported on the W-2;
Employer's Employer Identification Number (EIN) as
reported on the W-2;
Address associated with the EIN taken from SSA's Employer
Identification File supplied by the IRS;
Employee's wages as reported on the W-2; and
Tax year associated with the wages on the W-2.
We believe DHS representatives are in a better position to
determine the full extent of SSA information that would assist them in
properly enforcing the Nation's immigration laws. However, initially,
DHS may be most interested in a list of employers who repeatedly and
egregiously file incorrect wage reports, because it appears to indicate
the employment of unauthorized noncitizens. For example, SSA could
provide DHS information regarding the top 100 employers with the
largest number or percentage of wage items in the ESF. To pursue
possible investigation and enforcement actions against these employers,
DHS would need the employer's name and address, the number of employees
with mismatched names/SSNs, the percent of reported payroll that these
suspended items represent, and the tax year(s) in question. If DHS
determined a more in-depth investigation was necessary, it might also
need individual taxpayers' names and reported SSNs to assist them in
reviewing employee files. The SSA obtains this information through the
wage reporting process and IRS records. Accordingly, the employee wage
information is subject to privacy protections afforded by section 6103
of the Internal Revenue Code. As such, any data sharing would likely
require discussions between SSA, DHS and IRS to ensure a proper
understanding of the data and compliance with existing laws.
Question: In a 2001 report, Obstacles to Reducing SSN Misuse in the
Agriculture Industry, the SSA IG recommended introducing legislation
that would provide SSA with authority to require chronic problem
employers to use the Agency's SSN verification services. At the time,
SSA disagreed, saying the IRS already had authority to penalize
employers who do not comply with wage reporting requirements. Given the
fact that the IRS has no record of penalizing even employers with the
largest number or percentage of name/SSN mismatches on W-2s reported,
would you encourage SSA to rethink its position?
Answer: We made this recommendation to SSA for the purpose of
addressing employers who frequently and egregiously report wages for
employees with name and SSN discrepancies. We continue to believe that
to significantly stem the growth of SSA's ESF, chronic problem
employers should be required to use a verification service. At the time
of our 2001 report, the SSA/DHS Basic Pilot was not widely available.
However, this program is now open to all employers nationwide. This
program has an advantage over SSA's enumeration verification services
in that it also provides information to employers regarding an
employee's work authorization status. Accordingly, we would now
encourage the use of this program.
We certainly recognize the implications of requiring employers to
use such a service--including the impact on labor availability for
employers who are reliant on the unauthorized noncitizen workforce.
However, in lieu of IRS penalties and DHS workplace enforcement, we
believe requiring chronic problem employers--who do not already do so--
to use the SSA/DHS Basic Pilot could be the best method to address ESF
growth. Given that IRS and DHS currently have primary enforcement
authority, many of these employers may also be hiring individuals in
violation of the Immigration and Naturalization Act (P.L. 99-603), and
the Basic Pilot is primarily maintained by DHS, we believe DHS may now
be in a better position to enforce a provision such as the one we
recommended in our 2001 report.
Question: The SSA currently does not have authority to pursue civil
or criminal penalties for employers who submit wage reports with name/
SSN mismatches. Would you recommend that Congress give SSA such
authority? If Congress were to give such authority to SSA, how might
the Office of the IG utilize it? Could you provide your recommendations
for specifying such authority?
Given that many of these employers may also be hiring individuals
in violation of the Immigration and Naturalization Act and misreporting
wages in violation of the Internal Revenue Code, we believe IRS and DHS
may be in a better position to pursue civil or criminal penalties for
employers who submit wage reports with name/SSN mismatches.
However, if Congress were to afford SSA with the authority to
pursue civil or criminal penalties for employers who submit wage
reports with name/SSN mismatches, the Office of the IG could utilize
such authority under section 1129 of the Social Security Act for false
statements and/or representations made to SSA, the felony fraud
provisions of the Act found in Title II (42 U.S.C. 408(a)(1)-(8) and
Title XVI (42 U.S.C. 1383a(a)(1)-(4)), and various Title 18 criminal
provisions. With such authority, we recognize that potential
jurisdictional issues with IRS will need to be resolved.
Question: In a February 2005 report, GAO said that SSN verification
services for paper or phone requests require the worker's date of
birth, but that electronic verification requests do not. Would
correcting this inconsistency in SSN verification services help prevent
individuals from using the SSNs of children to engage in unauthoirzed
work?
We agree that requiring the employee's date of birth in SSA's
electronic employee verification services would offer an additional
level of assurance concerning the identity of the employee and
potentially prevent individuals from misusing the SSNs of children. The
employee's date of birth is currently an optional field in SSA's
Employer Verification Service for Registered Users and SSNVS. As a
result, these systems are already capable of verifying an employee's
date of birth when it is provided by an employer. Furthermore, SSA
participates in the joint SSA/DHS Basic Pilot program, which requires
the employee's date of birth as part of the overall verification
process.
[Questions submitted by Chairman McCrery to Barbara Bovbjerg and
his responses follow:]
Question: If the Basic Pilot were made mandatory, is it likely that
we would see an increase in the use of counterfeit documents like the
SSN card? Would we see an increase in identity theft?
Answer: In our August 2005 report on employment verification and
worksite enforcement efforts, we said that the Basic Pilot Program has
potential to help enhance the verification process and substantially
reduce document fraud (use of counterfeit documents) but is unable to
detect identity fraud (fraudulent use of valid documents or information
belonging to others). A mandatory Basic Pilot verification could make
some counterfeit documents more difficult to use to falsely demonstrate
work authorization. For example, if an unauthorized worker presented
counterfeit documents containing false information, the Basic Pilot
program would not confirm the worker's eligibility because the
Employment Eligibility Verification Form I-9 information, such as a
false name or SSN, would not match the SSA's and DHS database
information. An increase in counterfeit Social Security cards,
specifically, seems unlikely because the Social Security card is only 1
of 15 documents that can be used to prove eligibility to work. While
workers are required to provide an SSN, they are not required to show
the card to obtain employment. In addition, use of a counterfeit Social
Security card with a false name or number could be detected by
employers using the Basic Pilot.
On the other hand, the Basic Pilot's verification system cannot
detect identity fraud. The fraudulent use of documents containing the
real names, SSNs, and alien identification numbers of work-authorized
persons could be used to demonstrate work eligibility and would not be
detected through Basic Pilot's verification system. An unauthorized
worker could present valid documentation belonging to a work-authorized
person or could present counterfeit documentation that contains valid
information and appears authentic. In either instance, the Basic Pilot
may verify the employee as work-authorized because the documentation
matched SSA and DHS data. It is possible, therefore, that identity
fraud could increase with mandatory verification, as unauthorized
workers could have new incentives to use identities of work-authorized
individuals. However, the extent to which identity fraud might increase
and unauthorized work might decrease is unknown. The DHS is currently
considering possible ways to enhance the Basic Pilot Program to help
detect cases of identity fraud.
The requirements established in the REAL ID Act of 2005 (P.L. 109-
13) for the issuance of state driver's licenses and identification
documents, have the potential to improve identity verification.
However, this form of identification is 1 of 20 documents acceptable
for proving identity in the I-9 process, and identity fraud could still
be possible.
Question: Several bills introduced this Congress would require
employers to verify the employment eligibility of new hires through a
database that combines data from the SSA's SSN applications and the DHS
immigration records. Currently, in the Basic Pilot program, the two
sources of data are kept separate, and each agency independently
verifies the information for employers without sharing it with the
other agency. Is there any particular advantage or disadvantage to
combining the databases? Would it increase the accuracy of the data?
Would it increase the speed of verifications? Would it improve program
administration? What effect might it have on the privacy of personal
information?
Answer: Combining DHS's immigration records and SSA's cardholder
data likely would not improve the employment eligibility verification
process because the existing problems in the verification process are
not related to the data sources being kept separate. Using two
different databases to verify different pieces of information does not
hinder the verification process, as long as the employment verification
program is able to query the appropriate databases to verify the
relevant information. Delays identified in Basic Pilot's verification
process are often the result of delays entering data into DHS's
database after DHS makes its initial work eligibility determinations.
Since its database is not up-to-date, DHS employees need to verify some
work authorizations manually. Combining the databases would not
increase the speed of verifications if the speed of DHS's data entry
remains unchanged.
Combining the databases would also not improve the accuracy of
results provided to the employer because the source of the information
would remain the same. The SSA's cardholder identification file is used
to verify name, SSN, and citizenship, and DHS's immigration records are
used to verify employment authorization using an alien identification
number. The SSA's database contains demographic information collected
when the SSN was issued or updated, as with a name change, its database
does not reliably contain up-to-date information on the work
authorization status of noncitizens. Although combining the two could
update SSA's work authorization data, combination is unnecessary for
establishing work authorization.
The SSA's program administration might be slightly improved by
linking the databases and updating some SSA information on work
authorization, but combining them would not be necessary to achieve
these improvements. For example, if DHS's data could be used to
automatically update SSA's work authorization information, SSA's
Nonwork Alien file could potentially become more accurate. However,
linking the two databases may be challenging due to the lack of a
common identifier. It is not clear how difficult the task of linking
the two databases might be, but our ongoing work for the Subcommittee
on coordination between SSA and DHS will address these issues.
In addition to providing little, if any, advantage in terms of
speed or accuracy, there are possible disadvantages to combining the
databases. These databases were developed to aid in the administration
of two different programs. Combining them could detract from their
intended purposes and could prove costly.
Question: In an August 2005 report, GAO said that document and
identity fraud have undermined the ``Form I-9'' process--the process
required under immigration law by which employers verify the identity
and employment eligibility of newly hired employees. The GAO
recommended a reassessment of the Form I-9 process, including the
possibility of reducing the number of acceptable work eligibility
documents. Some bills have been introduced this Congress that would
make the SSN card the sole identity and employment eligibility document
employers could accept, or alternatively would use a combination of an
SSN card and a state driver's license or ID card that complies with
standards established in the REAL ID Act or a federally-issued ID
document. Do you have any thoughts or recommendations on how to reduce
the documents employees are required to present to prove identity and
employment eligibility?
Answer: The DHS is currently assessing possible revisions to the
number of acceptable work eligibility documents but has not established
a target timeframe for completing this assessment. Completion of this
assessment and issuance of final regulations on acceptable work
eligibility documents should strengthen the current employment
verification process and make it simpler and more secure. In addition
to a reduction in the number of acceptable work eligibility documents,
enhancing the integrity of identity and work eligibility documents is
also an important consideration in making the employment verification
process more secure. We have previously reported on the possible use of
biometrics in verification and identification processes. Biometrics can
theoretically be very effective personal identifiers because the
characteristics they measure are thought to be distinct to each person.
While biometrics show promise in enhancing verification and
identification processes, we have also reported on the tradeoffs for
using biometric indicators, such as concerns regarding the protections
under current law for biometric data and the absence of clear criteria
governing data sharing.
The Social Security card is of limited use in proving eligibility
to work and does not verify identity at all, it is a weak document in
the I-9 process, which requires employers to verify the identity and
work authorization of newly hired employees. The Social Security card
is 1 of 15 documents that may be used to establish an individual's
eligibility to work. The card has had many different versions and is
easily counterfeited. There is also a history of vulnerabilities in the
process of issuing numbers to noncitizens, including limited
verification of identity and work authorization documents. In addition,
while Social Security cards issued for nonwork purposes carry the label
``Not Valid for Employment,'' nonwork cards issued before May 1982 do
not include this statement. We have work ongoing on Social Security
card enhancement that will be issued later this month.
Under the REAL ID Act, state-issued driver's licenses and
identification documents could improve the identity portion of the
employment eligibility verification process. The licenses will be
required to include physical security features to prevent
counterfeiting and tampering, these identification documents could make
the I-9 process less vulnerable to fraud and counterfeiting. However,
even under REAL ID Act standards, identity theft could be possible, and
each additional document permitted to establish identity and
eligibility to work is another opportunity for document fraud and
identity theft.
Question: In a February 2005 report, the GAO said that the SSN
verification services for paper or phone requests require the worker's
date of birth, but the electronic requests do not. Would correcting
this inconsistency in SSN verification services help prevent
individuals from using the SSNs of children to engage in unauthorized
work?
Answer: Requiring the worker's date of birth for SSN verification
services could help prevent use of children's SSNs for unauthorized
work if employers used the services more frequently and if they refused
to hire persons with name, SSN, and birth date combinations that
obviously belonged to children. Requiring the date of birth could also
help identify other types of fraud, wherein the worker is young, but
the SSN is assigned to someone who would be much older or vise versa.
The birth date is one additional piece of information that would have
to match SSA's data, persons using this information fraudulently would
need more than a name and SSN.
[Questions submitted by Chairman McCrery to the Honorable Mark W.
Everson and his responses follow:]
Question: The SSA IG has recommended in the past that SSA seek
legislative authority to create an SSA-based sanctions program for
employers submitting wage reports with mismatched names and SSNs. What
are your thoughts about giving SSA such authority?
Answer: We believe that the ability to impose sanctions on
employers who fail to take appropriate steps to provide matched names
and SSNs for their employees is an essential tool in the effort to
obtain high rates of compliance with employment tax withholding and
reporting rules. We caution, however, that only a portion of mismatches
are due to willful or negligent disregard by employers of current law
requirements, the cases where sanctions are likely to be reasonable and
effective. The details of an additional, SSA-based sanctions program
are unspecified at this point, we do not have a view about whether such
a program would reduce mismatches and improve compliance with the tax
law. However, since the institutional roles of the IRS and SSA are
different, it is possible that a well-designed compliance program
administered by SSA could complement the IRS's current program.
Question: In your testimony, you said that about half of wage
reports in the suspense file had income tax withheld, and that the
withholding tends to be significantly less compared to returns with
valid SSNs. Does this mean increased enforcement will yield little
taxes? What about Social Security and Medicare taxes? Also, how can you
be certain that correct withholding rates are being applied to workers
with mismatched wage reports and that they do not have additional
earnings being reported under other incorrect SSNs?
Answer: Although we estimate the total income tax impact of the W-
2s with invalid SSNs is significant, the benefit of pursuing the
associated employees with enforcement resources would be very low. Our
analysis found that the estimated average tax impact per invalid W-2 is
only about $170 for those with withholding and about $90 on those
without withholding. In addition, with about 98% of these W-2s with
invalid SSNs reporting less than $30,000 in wages, many of the
associated employees may not even be required to file tax returns.
Our primary means of dealing with egregious underwithholding is
through our Withholding Compliance Program (WCP). For this program, we
aggregate the wages and withholding on all W-2s reporting the same SSN,
whether valid or invalid, and subject these amounts to our WCP
criteria. (Employees who use more than one invalid SSN may be in the
program more than one time since we have no way to aggregate these W-
2s.) If an employee's aggregated W-2 information shows egregious
underwithholding, we send a withholding ``lock-in'' letter to each of
his/her employers. This letter is intended to ensure the employers
withhold the correct amount of taxes on future wages paid to the
employee. This is one of our most effective and least costly
enforcement programs. Provided the employer complies with the lock-in
letter, the IRS will receive close to the correct amount of income
taxes, regardless of whether the employee files a return or not. WCP
also will identify the small percentage of employees with invalid SSNs
that are egregious under-withholders.
In our TY 2004 study of W-2s with invalid SSNs, we did not include
any analysis of withholding rates for Social Security and Medicare
taxes. However, the IRS and SSA use the Combined Annual Wage Reporting
(CAWR) program to identify discrepancies between the amounts of
withheld Social Security and Medicare taxes that employers report to
SSA on W-2s and the amounts reported to the IRS on Forms 941. The SSA
corresponds with the employer on cases that do not balance. Any cases
not resolved after this reconciliation are sent to the IRS for further
action.
Question: In your testimony, you discuss a survey of 297 employers
the IRS has recently concluded. You said it points out the difficulties
associated with assessing or sustaining a penalty for employers with
high rates of name/SSN mismatches in their wage reports: document
fraud, high employee turnover, and the lag time from when an employee
earns wages and when the IRS notifies an employer of the mismatch.
Given these difficulties, would it be a better solution to allow the
IRS to share some limited amount of tax information with the DHS so
that they could target immigration law enforcement, rather than pursue
IRS penalties?
Answer: As you know, comprehensive immigration reform--including
border security, interior enforcement, and a temporary worker program--
is a top Administration priority. The Administration believes that
worksite enforcement is critical to the success of immigration reform.
I am well aware of various legislative proposals to help address this
problem, including requiring more information sharing between Federal
agencies. Whatever the ultimate solution, we have to try to minimize
the negative consequences on employers, employees and our national
economy. As a former Deputy Commissioner at INS, I am sensitive to the
need for a system of immigration that functions effectively. Having
said that, any significant change requiring improved information
sharing between Federal agencies or between Federal agencies and
employers must account for protections found in section 6103 of the
Internal Revenue Code. This section protects taxpayers from having
their tax return information shared with third parties. We must make
sure that any change in the current system encourages the type of
behavior that we desire from both employees and employers.
Question: Given the current difficulties of correcting wage reports
due to high employee turnover and the lag time between when an employee
earns wages and when the IRS notifies an employer of a mismatch, would
a better solution be to require employers with high mismatch rates to
participate in the Basic Pilot?
Answer: The intent of the Basic Pilot program, developed by DHS, is
to inform employers whether their employees are authorized to work in
the United States. From a tax administration perspective, however,
there is no distinction between taxpayers who are authorized to work in
this country and those who are not. Further, the ability of an employer
to verify an employee's work eligibility does little to ensure that the
employee will file an income tax return.
Question: The SSA testimony stated that SSA and the IRS have
established an interagency effort and are working to resolve issues and
cooperate on efforts that cross agency lines. Could you describe what
these interagency Committees have discussed, and what have been some of
the results of their deliberations?
Answer: We believe the SSA testimony refers to a group of
executives from the IRS and SSA that meets semi-annually to discuss
issues of mutual interest and to determine how the two agencies can
best work together to address these issues. The most recent meeting
occurred in November 2005 and included discussions on:
The long-term viability of the electronic reporting
system for ERISA reports sent to SSA (agreed to convene joint group to
pursue solutions)
Allowing IRS employees outside of the Philadelphia campus
to have electronic access to wage reporting data maintained by SSA
(agreed that the IRS would submit a formal proposal)
Providing SSA with regular updates of the IRS file which
they use to authenticate users of SSNVS, a SSN verification system for
employers (agreed to get appropriate individuals from both agencies
together to discuss the issues)
Question: Some bills have been introduced that would prohibit
employers from deducting business expenses for wages paid to
unauthorized workers. What are your views on that option? Would it
serve as an incentive for employers to use the Basic Pilot to verify
their workers' employment eligibility? Would it make sense to expand
that prohibition to any wages reported under mismatched names and SSNs?
Answer: While the intent of such proposals is to reduce the number
of unauthorized workers and to create an incentive for employers to
make additional efforts to correct mismatched names and SSNs, a rule
prohibiting employers from deducting these wages would be difficult to
administer and would also have a negative effect on tax compliance. We
anticipate that it would be difficult to determine whether a business's
deductions were attributable to wages paid to an unauthorized worker,
even in an audit. Moreover, disallowing the deduction might make it
less costly for employers to pay employees ``under the table,'' thereby
reducing employment taxes collected from the employer and providing
more opportunity for employees to evade taxation. The Tax Code
currently provides for penalties for failure to file correct
information returns and payee statements. (Sections 6721-6725).
Question: Has the IRS audited employers who use day-laborer sites
to determine if they are withholding income taxes and paying Social
Security and Medicare payroll taxes on their employees? If employers
are hiring people under the table and not paying the appropriate taxes,
does it depress wages for other American workers?
Answer: The IRS does not specifically target day-laborer sites in
its employment tax examinations. However, all W-2s are subject to
review for appropriate income tax withholding through our Withholding
Compliance program. We address issues related to proper payments of
Social Security and Medicare payroll taxes through the Combined Annual
Wage Reporting program. (See response to #2 above.) Although the IRS
uses such programs to address the issues of withholding and payment of
appropriate taxes, we are not in a position to comment on the impact
that nonpayment of these taxes may have on wages paid to other American
workers.
Question: Section 6013 of the Internal Revenue Code was enacted to
prevent the inappropriate use of confidential taxpayer information. It
is based on the presumption that confidential taxpayer information
should not be used for non-tax reasons except in compelling
circumstances. In your opinion, to what extent does enforcement of
immigration or other laws justify an exception to that presumption?
What safeguards would you recommend to ensure that the use of
confidential taxpayer information be limited to compelling
circumstances?
Answer: We believe that any use of confidential taxpayer
information for non-tax purposes carries a risk of reducing voluntary
compliance with the tax laws, undermining the primary objective of the
IRS and reducing the availability and utility of the information
sought. Administering the tax system is the responsibility of this
Agency, it is institutionally difficult for us to weigh other
objectives against the value of high rates of compliance with the tax
law.
Similarly, it is not within our expertise to advise on the
mechanisms that should be utilized to balance objectives, such as the
value of enforcing the immigration laws, against the value of voluntary
compliance with the tax laws.
For an analysis of the appropriate balance between taxpayer privacy
and other important policy concerns, we refer you to a study produced
by the Treasury Department. The report states that ``additional
exceptions to the confidentiality of taxpayer information under section
6103 should be granted in rare circumstances and only where the Agency
can demonstrate, using established criteria, a need for the information
that clearly outweighs taxpayer privacy interests and concerns about
the effects on voluntary tax compliance.'' Report to The Congress on
Scope and Use of Taxpayer Confidentiality and Disclosure Provisions,
Office of Tax Policy, Department of the Treasury, at 69 (October 2000),
available at http://treas.gov/offices/tax-policy/library/confide.pdf
[Questions submitted by Chairman McCrery to the Honorable Stewart
A. Baker and his responses follow:]
Question: If the Basic Pilot were made mandatory, is it likely that
we would see an increase in the use of counterfeit documents like the
SSN card? Would we see an increase in identity theft?
Answer: In our August 2005 report on employment verification and
worksite enforcement efforts, we said that the Basic Pilot Program has
potential to help enhance the verification process and substantially
reduce document fraud (use of counterfeit documents) but is unable to
detect identity fraud (fraudulent use of valid documents or information
belonging to others).\1\ A mandatory Basic Pilot verification could
make some counterfeit documents more difficult to use to falsely
demonstrate work authorization. For example, if an unauthorized worker
presented counterfeit documents containing false information, the Basic
Pilot program would not confirm the worker's eligibility because the
Employment Eligibility Verification Form I-9 information, such as a
false name or Social Security number (SSN), would not match the Social
Security Administration's (SSA) and the Department of Homeland
Security's (DHS) database information. An increase in counterfeit
Social Security cards, specifically, seems unlikely because the Social
Security card is only one of 15 documents that can be used to prove
eligibility to work. While workers are required to provide a Social
Security number, they are not required to show the card to obtain
employment. In addition, use of a counterfeit Social Security card with
a false name or number could be detected by employers using the Basic
Pilot.
---------------------------------------------------------------------------
\1\ GAO, Immigration Enforcement: Weaknesses Hinder Employment
Verification and Worksite Enforcement Efforts, GAO-05-813 (Washington,
D.C.: August 31, 2005).
---------------------------------------------------------------------------
On the other hand, the Basic Pilot's verification system cannot
detect identity fraud. The fraudulent use of documents containing the
real names, SSNs, and alien identification numbers of work-authorized
persons could be used to demonstrate work eligibility and would not be
detected through Basic Pilot's verification system. An unauthorized
worker could present valid documentation belonging to a work-authorized
person or could present counterfeit documentation that contains valid
information and appears authentic. In either instance, the Basic Pilot
may verify the employee as work-authorized because the documentation
matched SSA and DHS data. It is possible, therefore, that identity
fraud could increase with mandatory verification, as unauthorized
workers could have new incentives to use identities of work-authorized
individuals. However, the extent to which identity fraud might increase
and unauthorized work might decrease is unknown. DHS is currently
considering possible ways to enhance the Basic Pilot Program to help
detect cases of identity fraud.
The requirements established in the Real ID Act of 2005 for the
issuance of state driver's licenses and identification documents, have
the potential to improve identity verification.\2\ However, this form
of identification is one of 20 documents acceptable for proving
identity in the I-9 process, and identity fraud could still be
possible.
\2\ P.L. 109-13, 49 U.S.C 30301 note.
Question: Several bills introduced this Congress would require
employers to verify the employment eligibility of new hires through a
database that combines data from the Social Security Administration's
(SSA's) SSN applications and the U.S. Department of Homeland Security's
(DHS's) immigration records. Currently, in the Basic Pilot program, the
two sources of data are kept separate, and each agency independently
verifies the information for employers without sharing it with the
other agency. Is there any particular advantage or disadvantage to
combining the databases? Would it increase the accuracy of the data?
Would it increase the speed of verifications? Would it improve program
administration? What effect might it have on the privacy of personal
information?
Answer: Combining DHS's immigration records and SSA's cardholder
data likely would not improve the employment eligibility verification
process because the existing problems in the verification process are
not related to the data sources being kept separate. Using two
different databases to verify different pieces of information does not
hinder the verification process, as long as the employment verification
program is able to query the appropriate databases to verify the
relevant information. Delays identified in Basic Pilot's verification
process are often the result of delays entering data into DHS's
database after DHS makes its initial work eligibility determinations.
Because its database is not up-to-date, DHS employees need to verify
some work authorizations manually. Combining the databases would not
increase the speed of verifications if the speed of DHS's data entry
remains unchanged.
Combining the databases would also not improve the accuracy of
results provided to the employer because the source of the information
would remain the same. SSA's cardholder identification file is used to
verify name, SSN, and citizenship, and DHS's immigration records are
used to verify employment authorization using an alien identification
number. Because SSA's database contains demographic information
collected when the SSN was issued or updated, as with a name change,
its database does not reliably contain up-to-date information on the
work authorization status of noncitizens. Although combining the two
could update SSA's work authorization data, combination is unnecessary
for establishing work authorization.
SSA's program administration might be slightly improved by linking
the databases and updating some SSA information on work authorization,
but combining them would not be necessary to achieve these
improvements. For example, if DHS's data could be used to automatically
update SSA's work authorization information, SSA's Nonwork Alien file
could potentially become more accurate. However, linking the two
databases may be challenging due to the lack of a common identifier. It
is not clear how difficult the task of linking the two databases might
be, but our ongoing work for the Subcommittee on coordination between
SSA and DHS will address these issues.
In addition to providing little, if any, advantage in terms of
speed or accuracy, there are possible disadvantages to combining the
databases. These databases were developed to aid in the administration
of two different programs. Combining them could detract from their
intended purposes and could prove costly.
Question: In an August 2005 report, the U.S. Government
Accountability Office (GAO) said that document and identity fraud have
undermined the ``Form I-9'' process--the process required under
immigration law by which employers verify the identity and employment
eligibility of newly hired employees. The GAO recommended a
reassessment of the Form I-9 process, including the possibility of
reducing the number of acceptable work eligibility documents. Some
bills have been introduced this Congress that would make the SSN card
the sole identity and employment eligibility document employers could
accept, or alternatively would use a combination of an SSN card and a
State driver's license or ID card that complies with standards
established in the REAL ID Act (P.L. 109-13) or a federally-issued ID
document. Do you have any thoughts or recommendations on how to reduce
the documents employees are required to present to prove identity and
employment eligibility?
Answer: DHS is currently assessing possible revisions to the number
of acceptable work eligibility documents but has not established a
target timeframe for completing this assessment. Completion of this
assessment and issuance of final regulations on acceptable work
eligibility documents should strengthen the current employment
verification process and make it simpler and more secure. In addition
to a reduction in the number of acceptable work eligibility documents,
enhancing the integrity of identity and work eligibility documents is
also an important consideration in making the employment verification
process more secure. We have previously reported on the possible use of
biometrics in verification and identification processes.\1\ Biometrics
can theoretically be very effective personal identifiers because the
characteristics they measure are thought to be distinct to each person.
While biometrics show promise in enhancing verification and
identification processes, we have also reported on the tradeoffs for
using biometric indicators, such as concerns regarding the protections
under current law for biometric data and the absence of clear criteria
governing data sharing.
---------------------------------------------------------------------------
\1\ GAO, Technology Assessment: Using Biometrics for Border
Security, GAO-03-174 (Washington, D.C.: Nov. 15, 2002).
---------------------------------------------------------------------------
Because the Social Security card is of limited use in proving
eligibility to work and does not verify identity at all, it is a weak
document in the I-9 process, which requires employers to verify the
identity and work authorization of newly hired employees. The Social
Security card is one of 15 documents that may be used to establish an
individual's eligibility to work. The card has had many different
versions and is easily counterfeited. There is also a history of
vulnerabilities in the process of issuing numbers to noncitizens,
including limited verification of identity and work authorization
documents. In addition, while Social Security cards issued for nonwork
purposes carry the label ``Not Valid for Employment,'' nonwork cards
issued before May 1982 do not include this statement. We have work
ongoing on Social Security card enhancement that will be issued later
this month.
Under the Real ID Act of 2005, state-issued driver's licenses and
identification documents could improve the identity portion of the
employment eligibility verification process. Because the licenses will
be required to include physical security features to prevent
counterfeiting and tampering, these identification documents could make
the I-9 process less vulnerable to fraud and counterfeiting. However,
even under Real ID Act standards, identity theft could be possible, and
each additional document permitted to establish identity and
eligibility to work is another opportunity for document fraud and
identity theft.
Question: In a February 2005 report, the GAO said that the SSN
verification services for paper or phone requests require the worker's
date of birth, but the electronic requests do not. Would correcting
this inconsistency in SSN verification services help prevent
individuals from using the SSNs of children to engage in unauthorized
work?
Answer: Requiring the worker's date of birth for SSN verification
services could help prevent use of children's SSNs for unauthorized
work if employers used the services more frequently and if they refused
to hire persons with name, SSN, and birth date combinations that
obviously belonged to children. Requiring the date of birth could also
help identify other types of fraud, wherein the worker is young, but
the SSN is assigned to someone who would be much older or vise versa.
Because the birth date is one additional piece of information that
would have to match SSA's data, persons using this information
fraudulently would need more than a name and SSN.
[Questions submitted by Chairman Ramstad to the Honorable Mark W.
Everson and his responses follow:]
Question: During the hearing, I asked you if an employer hired 100
hundred employees on the same day and they all submitted signed W-4s
using the same SSN would the IRS have the ability to penalize the
employer. You responded that you thought the IRS would have the ability
to penalize the employer. Tresury Regulation 301.6724-1(g) indicates
that if an employer receives a signed W-4 from an employee that the
employer would have satisfied due diligence requirements, and therefore
would not be penalized. Given this provision in the regulations, please
explain why you think the IRS would have the ability to sustain
penalties in the case I described.
Answer: An information return penalty is waived for reasonable
cause if the filer made an initial and, if necessary, annual request
that the payee provide an accurate SSN/TIN, or establishes that due
diligence was otherwise used. An information return filer may establish
reasonable cause for failure to include required information by showing
that the failure was due to events beyond the filer's control,
including actions of the payee providing the necessary information, and
that the filer acted in a responsible manner. Acting in a responsible
manner means that the filer exercised reasonable care, which is that
standard of care that a reasonable prudent person would use under the
circumstances in the course of its business in determining its filing
obligations and undertook significant steps to avoid or mitigate the
failure to provide correct information. Accepting the same SSN for 100
employees on the same day would not qualify for penalty waiver under
the prudent person standard.
Question: In your testimony you said that increased enforcemnt of
accurate reporting of names and SSNs could have a negative revenue
impact by driving workers into the underground economy. Has the IRS
done any empirical studies to determine the effect of increased
enforcemnt?
Answer: We have not specifically measured the impact of enforcement
efforts targeting name/SSN mismatches on Forms W-2. However, based upon
our recent compliance check of a limited number of employers, we found
that employers relied upon information provided by employees. Although
employers unknowingly reported mismatched names and numbers, many
withheld and paid Social Security and employment taxes on behalf of
their employees. Anecdotal evidence suggests that employees who
deliberately provide false information to employers do so to remain
anonymous to the IRS. Any enforcement effort may impact worker
classification from employee to independent contractor, resulting in
lost withholding opportunities. Additionally, such efforts could prompt
a cash-based workforce to avoid information reporting entirely, since
it is more likely that cash payments are not reported on information
documents.
Question: It has been the law since 1996 that a person who receives
a Social Security number solely for the purpose of receiving federal
benefits is not supposed to be able to receive the Earned Income Tax
Credit. However, it is my understanding that because of the failure to
share information between SSA and IRS, that these individuals have been
receiving the EITC every year. Do you have an estimate as to how much
Earned Income Tax Credit dollars have been improperly paid out to
individuals who have a Social Security number solely for the purpose of
receiving federal benefits?
Answer: The IRS cannot estimate the amount of EITC dollars paid in
error to individuals who have a SSN solely for the purpose of receiving
Federal benefits. Although information passed on to the IRS from SSA
since 1980 contains an indicator showing that an SSN recipient is not
authorized to work in the United States, the data does not distinguish
between those who receive an SSN in order to obtain government benefits
from those who obtain an SSN for other purposes that currently may
allow a person to qualify for EITC.
Question: There is a proposal in the President's Budget that would
address the issue of individuals improperly receiving EITC refunds with
an SSN issued solely for the purposes of receiving Federal benefits.
How would the proposal address this problem?
Answer: In 1996, Congress enacted a provision (IRC sec. 32(m)) that
was intended to deny the EITC to individuals who were not authorized to
work in the United States. This provision requires EITC claimants to
provide a valid SSN for themselves and their qualifying children. It
explicitly denies the EITC to noncitizens who are not authorized to
work in the United States but who, under clause (II) of sec.
205(c)(2)(B)(i) of the Social Security Act, obtain an SSN solely for
the purpose of claiming government benefits (such as public
assistance). The 1996 Act also gave the IRS the authority to
automatically deny such claims during processing using ``mathematical
error'' procedures. (Without mathematical error authority, the IRS can
still deny ineligible claims through the examination process. However,
more ineligible claims can be denied through the less labor-intensive
mathematical error procedures.)
At the time of enactment, it was thought that this provision would
effectively restrict EITC eligibility to U.S. citizens, permanent
residents (``green card'' holders), and other noncitizens who obtain an
SSN because their visas authorize them to work in the United States.
These individuals are entitled to obtain an SSN under clause (I) of
sec.205(c)(2)(B)(i) of the Social Security Act.
However, Sec. 32(m) inadvertently allows some undocumented workers
to receive the EITC. Until recently, it was possible for some
individuals to receive social security numbers for reasons other than
to obtain Federal benefits--e.g., to obtain a driver's license in some
states or, before the adoption of ITINs, to file a tax return. Further,
while SSA records contain an indicator showing that an SSN holder is
not authorized to work in the United States, the records do not
distinguish between those who receive an SSN in order to obtain
government benefits from those who obtain an SSN for other purposes. As
a result, the IRS has never used its mathematical error authority to
deny EITC claims of certain undocumented workers, for fear of denying
the credit to individuals who are technically eligible (albeit
undocumented workers).
In the FY 2007 budget, the administration is proposing that sec.
32(m) be rewritten to state that for purposes of the EITC, a valid SSN
is one issued either to a citizen of the United States or pursuant to
clause I of section 205(c)(2)(B)(i) of the Social Security Act. This
modification would effectively deny EITC eligibility to individuals who
were issued SSNs for any non-work reason--as was the intent of Congress
in 1996. Further, this modification would allow the IRS to implement
the existing math error authority to deny the EITC to undocumented
workers, because individuals identified by SSA as unauthorized to work
in the United States would generally be ineligible for the EITC.
Question: The House recently passed the ``Border Protection,
Antiterrorism, and Illegal Immigration Control Act of 2005,'' which
would allow the Secretary of the Department of Homeland Security to
access any information maintained by any department or agency of the
government concerning any person seeking any benefit or privilege under
immigration laws. Does the IRS believe that this provision would apply
to taxpayer returns or taxpayer information?
Answer: The Administration is working on a legal determination as
to whether this provision would apply to taxpayer returns or taxpayer
information. From a tax administration perspective, the IRS recommends
that the legislative provision reference 26 USC 6103. In the
Administration's legislative discussions, we have proposed language
that specifically refers to 6103.
[Questions submitted by Chairman Ramstad to the Honorable James B.
Lockhart and his responses follow:]
Question: Does SSA share the opinion of DHS that the non-work alien
file is inaccurate and unusable for DHS agents seeking individuals who
performed unauthorized to work? Has DHS informed SSA of the problems it
has experienced with the non-work alien file?
Answer: The information provided to the Department of Homeland
Security (DHS) is based on wages the Social Security Administration
(SSA) posts to the earnings records of the individuals assigned the
particular Social Security numbers (SSN). The information in the report
to DHS accurately reflects these posted earnings. The report also
includes the most current data SSA has to provide to DHS. The data is
in the format agreed to in a Memorandum of Understanding (MOU) between
SSA and DHS. It is unclear why the information contained in the file
would be unusable for DHS agents seeking individuals who performed
unauthorized work.
8 U.S.C. 1360(c)(2) required SSA to provide information
concerning the earnings reported on SSNs issued to aliens not entitled
to work under the Immigration and Nationality Act. This statute
provides:
``If earnings are reported on or after January 1, 1997, to the
Social Security Administration on a Social Security account number
issued to an alien not authorized to work in the United States, the
Commissioner of Social Security shall provide the Attorney General with
information regarding the name and address of the alien, the name and
address of the person reporting the earnings, and the amount of the
earnings. The information shall be provided in an electronic form
agreed upon by the Commissioner and the Attorney General.''
SSA entered into a data-sharing MOU with the Immigration and
Nationality Service (INS) in 1999 to implement the requirement
regarding reporting earnings on aliens not authorized to work. SSA
began sending this information to INS for Tax Year 1996 in 1998, and
has continued sending the file on an annual basis. The MOU transitioned
to DHS when the functions of INS migrated to DHS. SSA is currently
reviewing this MOU to determine if it needs to be updated. In addition
to providing the data as required by the MOU, at DHS' request, SSA
provides the identical information to DHS in a file that could be used
on a personal computer. This file format was first sent in 2004 for TY
2002. SSA continues to send both files to DHS.
[Questions submitted by Chairman Ramstad to the Honorable Stewart
A. Baker and his responses follow:]
Question: In your testimony, you said thet DHS sees a clear benefit
to receiving from the Social Security Administration portions of the
no-match data that is currently protected by taxpayer privacy laws. Yet
you did not specify exactly what information DHS proposes that it
receive. Can you provide us with specifics about what DHS thinks it
should receive? For example, are you seeking information relating to
all employers with mismatches, or just certain employers with egregious
problems?
Answer: DHS would emphasize the need for information relating to
all employers with earnings that appear in the Social Security
Administration's (SSA) Earnings Suspense File (ESF). The fact that a
large percentage of employees and employers who receive SSA ``no
match'' letters fail to correct or address these discrepancies
indicates that there is widespread use of fraudulent Social Security
numbers. The SSA Inspector General has also acknowledged that
unauthorized employees or illegal immigrants account for a significant,
growing portion of entries in the ESF.
With access to the ESF data, DHS would be able to address targeted
weaknesses in critical infrastructure and other national security
related areas and industries, in addition to identifying and targeting
enforcement efforts toward the obvious egregious employers. Access to
this data should be broad enough for DHS to target known fraud schemes
such as use of a Social Security Number by multiple employees or use of
Social Security Numbers belonging to dead persons or persons too young
to work report income contributions. Data access must be sufficiently
broad to allow DHS to address and target new fraud schemes as they
emerge. Access to the ESF data would enhance hundreds of existing
worksite enforcement investigations by helping to refute an employer's
``good faith'' defense.
DHS is looking to establish a good, flexible data-sharing
relationship with the SSA to address today's most apparent problems,
but also to adjust and respond to future challenges related to illegal
immigration. Once the widespread use of fraudulent Social Security
Numbers is eliminated, criminal organizations and other immigration
violators will look for other ways to circumvent the immigration and
employment laws. DHS must be ready to respond to these new challenges
with the appropriate tools.
Question: In 1996, Congress required SSA to provide DHS with a data
file called the Non-Work Alien file, which contains information on
wages reported to Social Security numbers issued for non-work purposes.
For years, the DHS did not use this information because of computer
compatibility problems. You indicated at the hearing that DHS was not
ready to say the file was unusuable. Can you explain what DHS is doing
to analyze this information, and explain if and when this can be used
for immigration enforcement purposes?
Answer: From 1997 to 2004, SSA forwarded the NWAF to the INS and
later to DHS as required by law and consistent with a Memorandum of
Understanding. However, formatting issues made it difficult to use the
NWAF. Beginning in February 2005, DHS/ICE and SSA worked together to
convert that data into a more usable format.
During FY 2006, DHS successfully accessed and analyzed NWAF data (a
list of names and SSNs of individuals originally issued) for the first
time and conducted DHS immigration record checks on a sampling of
aliens' names and other information from the NWAF. Preliminary results
of these checks indicate that only 34 percent of the individuals named
in the file are actually authorized to work in the United States, an
indication that this information could be valuable in conducting
enforcement investigations. On April 4, 2006, ICE received the most
recent NWAF data from SSA and has started to analyze this new dataset.
[Submissions for the record follow:]
Rockwall, Texas 75087
February 10, 2006
Social Security Committee
House Ways and Means
U.S. Congress
Washington, D.C.
Dear Committee Members;
Thank you for this opportunity. I would like to express the need of
the elimination of the GPO and WEP. These two clauses do not uphold the
integrity and intent of the Social Security Fund. The punishment is
given to undeserving people and in effect takes away something the
common people have and need. Please remove the bill from the committee
and bring the vote before the full house.
Thank you,
Robert Davis
Center for Economic Progress
Consumer Federation of America
Consumers Union
National Consumer Law Center
National Council of La Raza
National Employment Law Project
National Immigration Law Center
February 15, 2006
The Honorable Jim Ramstad
Chairman, Subcommittee on Oversight
United States House of Representatives
Washington, D.C.
The Honorable Jim McCrery
Chairman, Subcommittee on Social Security
United States House of Representatives
Washington, D.C.
Dear Congressman Ramstad and Congressman McCrery:
The undersigned groups, comprised of consumer advocates, civil
rights organizations, free tax preparation programs, and immigrant
rights advocates, collectively represent and serve thousands of low-
income taxpaying immigrant families. All of us strongly oppose any
changes to Section 6103 of the Internal Revenue Code that would permit
wholesale sharing of information between the Internal Revenue Service
and Department of Homeland Security (DHS). We also attach to this
written testimony a letter from October 2003, in which over 150
organizations expressed similar opposition to information sharing by
IRS to DHS about immigrant taxpayers.
The February 13 edition of Tax Notes reported that one focus of the
February 16, 2006 hearing will be potential data sharing between IRS,
DHS and the Social Security Administration. We are adamantly opposed to
any proposal that allows the IRS to routinely send tax information to
DHS, including information about the Individual Tax Identification
Number (ITINs), tax returns filed with ITINs, ITIN applications (IRS
Form W-7), etc.
One of the hallmarks of the current tax code is confidentiality of
taxpayer information. The IRS Code presumes that taxpayer information,
which can be highly sensitive, is private and confidential unless
subject to a specific exception. This confidentiality both protects
taxpayers and encourages compliance with tax laws.
To remove the protective cloak of confidentiality for an entire
class of taxpayers violates a fundamental principle of the tax code
established in the wake of prior abuses. It sets a dangerous precedent,
and will discourage immigrants from complying with tax laws.
Undocumented immigrants already face significant disincentives and
barriers to filing their tax returns. If they know that IRS information
is routinely sent to DHS--or even that there is a possibility that the
information will be shared--current filers will be less likely to file
their taxes in subsequent years, and non-filers will be less likely to
obtain ITINs and become filers.
The National Taxpayer Advocate has noted similar concerns.
According to the Tax Notes article cited above, the National Taxpayer
Advocate expressed at a 2004 hearing before the Joint Subcommittees on
this same matter that `` `fishing expeditions' by other government
agencies that could result from expanding section 6103 would lead to
more illegal immigrants going underground from the IRS.''
Wholesale and undefined disclosure also will not assist in
investigating terrorism or criminal activity, because it will
discourage millions of taxpayers from filing returns. This will hurt,
not help, national security as well as tax compliance. When immigrants
file tax returns, federal law enforcement and intelligence authorities
can access that information IF there is evidence of criminal or
terrorist activity. However, if immigrants as a group are discouraged
from participating in the tax system, there will be no documents and no
paper trail to share.
If you have any questions or comments on our submission, please
feel free to contact Chi Chi Wu at 617-542-8010 or [email protected]. Thank
you for your consideration.
Sincerely,
Chi Chi Wu
National Consumer Law Center
(on behalf of its low-income clients)
Julie Kruse
National Community Tax Coalition
David Marzhal
Center for Economic Progress
Catherine K. Ruckelshaus
National Employment Law Project
Marielena Hincapie
National Immigration Law Center
Beatriz Ibarra
National Council of La Raza
______
Dear Commissioner Everson, Assistant Secretary Olson and Assistant
Secretary Abernathy:
The undersigned stakeholders comprised of community and civil
rights organizations, tax and financial services agencies, labor
unions, and consumer and immigrant rights advocates, collectively
represent and serve thousands of low-income taxpaying immigrant
families. We are writing to express our concerns that the Internal
Revenue Service (IRS) is contemplating significant changes to the
Individual Taxpayer Identification Number (ITIN) program.
We strongly support IRS efforts to protect the integrity of the
ITIN. However, we oppose any measures by the Treasury Department or the
IRS to limit the issuance of ITINs or to prohibit states, financial
institutions, and other entities from using ITINs to provide hard
working and taxpaying low-income immigrants with banking or other
services. We also oppose any measure to make ITIN information available
to the Department of Homeland Security (DHS), including the Bureau of
Citizenship and Immigration Services (BCIS) and Bureau of Immigration
and Customs Enforcement (ICE) beyond what is currently permitted in IRS
Code Sec. 6103. These measures would be both ineffective in responding
to national security concerns while being harmful to individual
immigrant workers, their families, and their communities.
In creating the ITIN in 1996, the IRS enabled millions of hard
working immigrants to pay their taxes and file tax returns as required
by law. If IRS limits the issuance of ITINs, as a recent Washington
Times article suggests, immigrants ineligible for Social Security
Numbers will be discouraged from obtaining ITINs and thus, from filing
tax returns. Because the ITIN is accepted by many banks, limiting its
use would force tens of thousands of immigrants back into the cash
economy. The IRS and Treasury will be harming its own institutional
interests, and rather than strengthening national security, it will be
making our communities less secure.
Ensuring Tax Compliance
ITINs are an essential tool for the IRS to encourage immigrant
workers to file tax returns and assume the rights and responsibilities
offered under the Internal Revenue Code to more than 120 million
individual taxpayers. Without ITINs, hundreds of thousands of immigrant
workers would never file income tax returns and not have an opportunity
to build the documented economic track record that tax compliance
facilitates. Prior year tax returns are often required of consumers
seeking to secure credit or loans that serve as stepping stones to
economic success such as purchasing a home or a business. Promoting the
growth of an underclass of non-compliant taxpayers is not in the
interests of the IRS or Treasury as it will place a greater burden on
subsequent enforcement activities that require a redeployment of scarce
IRS resources.
Sharing of Confidential ITIN Information
The August 29 edition of Tax Notes reported statements by IRS
Commissioner Everson saying he has made loosening the nondisclosure
rules a top priority. The suggestion in this and other articles that
the IRS may seek legislation to authorize routine sharing of ITIN
information with immigration authorities is of grave concern.
We are adamantly opposed to any proposal that allows the IRS to
routinely send ITIN information to the Bureau of Immigration and
Customs Enforcement (ICE). One of the hallmarks of the current tax code
is confidentiality of taxpayer information. The IRS Code presumes that
taxpayer information, which can be highly sensitive, is private and
confidential unless subject to a specific exception. This
confidentiality both protects taxpayers and encourages compliance with
tax laws.
To remove the protective cloak of confidentiality for an entire
class of taxpayers violates a fundamental principle of the tax code
established in the wake of prior abuses. It sets a dangerous precedent,
and will discourage immigrants from complying with tax laws.
Undocumented immigrants already face significant disincentives and
barriers to filing their tax returns. If they know that IRS information
is routinely sent to ICE--or even that there is a possibility that the
information will be shared--current filers will be less likely to file
their taxes in subsequent years, and non-filers will be less likely to
obtain ITINs and become filers.
Furthermore, the IRS does not need such a wholesale exception to
taxpayer privacy in order to protect national security. Subsection
(i)(7) of IRS Code section 6103 permits the IRS to disclose tax
information (other than taxpayer return information) to federal law
enforcement or intelligence agencies investigating a terrorist
incident, threat, or activity. Subsection (i)(3)(A) permits IRS to
disclose tax information (other than taxpayer return information) to
alert other federal agencies of non-tax violations of federal criminal
law. Thus, section 6103 already contains a number of specific
exceptions that permit information-sharing in well-defined
circumstances. Wholesale and undefined disclosure, on the other hand,
will not assist in investigating terrorism or criminal activity, but
will discourage millions of taxpayers from filing returns.
Again, encouraging immigrants to obtain ITINs can only help, not
hurt, national security. When immigrants obtain ITINs and file tax
returns, federal law enforcement and intelligence authorities can
access that information IF there is evidence of criminal or terrorist
activity. However, if immigrants as a group are discouraged from
seeking ITINs, there will be no documents and no paper trail to share.
Bank Accounts
ITINs are essential to bringing the unbanked into the financial
mainstream. Until the advent of ITIN, banks could not open interest-
bearing bank accounts for those without a Social Security Number,
because of the requirement to report interest income to the IRS. With
the ITIN, banks can open accounts for hardworking immigrants and still
comply with tax laws. Thus, ITINs serve a tax purpose with respect to
bank accounts.
If the IRS restricts the issuance or use of ITINs, it may create
confusion among banks or might cause banks to refuse to accept ITINs.
This will set back successful efforts by banks, credit unions, and the
Treasury Department to bring more immigrants into the financial
mainstream. It will have an impact on the economic future of their
children. Today's non-citizen is likely to be eligible for a Social
Security Number tomorrow, and is likely to be the parent of citizen
children. If that immigrant is not banked now, it is less likely she
will be banked in the future and that her children will participate in
the banking mainstream.
In addition to allowing immigrants to build assets and avoid high
cost financial services, such as check cashers, payday lenders,
couriers, money transmitters, and the like, bank accounts are important
for immigrants because of the need to remit money back to their
countries of origin. Federal bank regulators prefer that international
money transmissions be accomplished through banks and thrifts, because
in comparison to other financial providers, these institutions are
subject to federal regulation and oversight. Bank accounts also help
deter robberies and assaults against law-abiding immigrants, who often
become the target of criminals because they are known to carry large
amounts of cash on payday.
Conclusion
It is for these reasons that the undersigned stakeholders urge the
Treasury Department and the IRS to desist from efforts to restrict the
issuance and use of the ITIN or to share ITIN information with
immigration agencies, and allow immigrant taxpayers to file their taxes
and continue contributing to this country's economy and general safety.
We will be contacting you shortly to request a meeting with the
appropriate representatives from Treasury and the IRS and a small group
representing the undersigned to follow up on these concerns.
Respectfully submitted,
David Marzahl
Executive Director
Jean Ann Fox
Consumer Federation of America
Salvador Gonzalez
Center for Economic Progress
Janell Duncan
Consumers Union
Chi Chi Wu
National Consumer Law Center
(on behalf of its low-income consumers)
Michele Waslin
Brenda Muniz
National Council of La Raza
Rebecca Smith
National Employment Law Project
Marielena Hincapie
Josh Bernstein
Joan Friedland
National Immigration Law Center
__________
Organizations signing in support:
Alianza del Pueblo (Knoxville, TN)
American Federation of Labor-Congress of Industrial Organizations
(Washington, DC)
American Friends Service Committee (Washington, DC)
American Immigration Lawyers Association (Washington, DC)
Amigos Center (Fort Myers, FL)
Asian American Legal Defense & Education Fund (New York, NY)
Asian Law Caucus (San Francisco, CA)
Asian Pacific American Legal Center (Los Angeles, CA)
Asociacion Tepeyac de New York (New York, NY)
Association of Community Organizations for Reform Now--ACORN
(Washington, DC)
Baltimore CASH Campaign (Baltimore, MD)
Bilingual Services (China Grove, NC)
Boston EITC Campaign (Boston, MA)
Boulder County Safehouse (Boulder, CO)
Brighton Park Neighborhood Council (Chicago, IL)
Broward Immigration Coalition (Coral Springs, FL)
Cabrillo Economic Development Corporation (Saticoy, CA)
Campaign for Working Families (Philadelphia, PA)
Caribbean Immigrant Services, Inc. (Jamaica, NY)
Carlos Rosario International Career Center and Public Charter School
(Washington, DC)
CASA of Maryland, Inc. (Silver Spring, MD)
Catholic Center (Huntingburg, IN)
Catholic Diocese of Richmond (Richmond, VA)
Center for Community Self-Help (Durham, NC)
Center for Hispanic Policy & Advocacy (Providence, RI)
Center For New Community, Iowa Project (Des Moines, IA)
Center for Training and Careers, Worknet (San Jose, CA)
Central American Resource Center (Los Angeles, CA)
Centro de Accion Latino (Greensboro, NC)
Centro Legal de la Raza (Oakland, CA)
Children's Defense Fund (Washington, DC)
Children's Defense Fund Minnesota (St. Paul, MN)
Children's Services Council of Broward County (Plantation, FL)
Community Comprehensive Social Services (Hallandale, FL)
Community Tax Aid, Inc. (Washington, DC)
Conexion Americas (Nashville, TN)
Corazon, Inc. (Cary, NC)
Council Migration Services (Philadelphia , PA)
Day Spring (Georgetown, IN)
DC Employment Justice Center (Washington, DC)
El Centro, Inc. (Kansas City, KS)
El Pueblo (Raleigh, NC)
Equal Justice Center (Austin, TX)
FaithAction International House (Greensboro, NC)
Family Economic Success Services (a project of the Piton Foundation)
(Denver, CO)
Farmworker Association of Florida (Apopka, FL)
Farmworker Legal Services of New York (New Paltz, NY)
Fellsmere Community Enrichment Program (Fellsmere, FL)
First Christian Church (Shelbyville, KY)
Florida Immigrant Advocacy Center (Miami, FL)
Garibay Tax Services (Santa Ana, CA)
Grassroots Collaborative (Chicago, IL)
Greater Boston Legal Services (on behalf of its low-income clients)
(Boston, MA)
Greater Upstate Law Project, Inc. (Albany, NY)
Grupo de Apoyo e Integracion Hispanoamericana (Allentown, PA)
Guadalupe Center (Huntingburg, IN)
Harry H. Dow Memorial Legal Assistance Fund (Boston, MA)
Hebrew Immigrant AID Society (Philadelphia, PA)
Hispanic Committee of Virginia (Falls Church, VA)
Hispanic Community Development Center (Dudley,NC)
Hispanic Ministry--Diocese of Joliet (Kankakee, IL)
Hispanic Organizations Leadership Alliance (Takoma Park, MD)
Housing Development Corp. of Northwest Oregon (Hillsboro, OR)
Housing Resource Center of Jane Addams Hull House (Chicago, IL)
Hotel Employees & Restaurant Employees International Union (Los
Angeles, CA)
Illinois Coalition for Immigrant and Refugee Rights (Chicago IL)
Immigrant Legal Advocacy Project (Portland, ME)
Immigrant Legal Resource Center (San Francisco, CA)
Immigrant Rights Network of Iowa and Nebraska (Des Moines, IA)
Immigration Advocacy Services (Astoria, NY)
Instituto del Progreso Latino (Chicago, IL)
Interfaith Leadership Project (Cicero, IL)
Iowa Coalition Against Domestic Violence (Des Moines, IA)
Irish Immigration Center (Boston, MA)
Jewish Community Action (St. Paul, MN)
Jobs and Affordable Housing Coalition (Minneapolis, MN)
JUNTOS (Philadelphia, PA)
Just Harvest (Pittsburgh, PA)
Korean American Resource and Cultural Center (Chicago, IL)
Korean Resource Center (Los Angeles, CA)
La Raza Community Resource Center (San Francisco, CA)
Labor Council for Latin American Advancement
Latino Community Credit Union (Durham, NC)
Latino Community Development Center (Durham, NC)
Latinos United for Change and Advancement (Madison, WI)
Lawyers' Committee for Civil Rights (San Francisco, CA)
Legal Aid Society (National) (New York, NY)
Legal Aid Society of Minneapolis (Minneapolis, MN)
Lehigh Valley Immigrant Workers' Rights Coalition (Allentown, PA)
LexLinc Community Development Federal Credit Union (Lexington, KY)
Little Village Community Development Corporation (Chicago, IL)
Los Companeros (Durango, CO)
LULAC Council 4609 (Richmond, VA)
Massachusetts Immigrant & Refugee Advocacy Coalition (Boston, MA)
Metropolitan Alliance of Congregations (Chicago, IL)
Migrant Legal Action Program (Washington, DC)
Milwaukee Council for the Spanish Speaking (Milwaukee, WI)
Minnesota Coalition for Undocumented Students (West St. Paul, MN)
Mitchell Bank (Milwaukee, WI)
Mountainlands Community Housing (Park City, Utah)
National Asian Pacific American Legal Consortium (Washington, DC)
National Association of Korean Americans, New York Chapter (New York,
NY)
National Center on Poverty Law (Chicago, IL)
National Immigration Forum (Washington, DC)
National Interfaith Committee for Worker Justice (Chicago, IL)
National Korean American Service & Education Consortium (Los Angeles,
CA)
National People's Action (Chicago, IL)
Nationalities Service Center (Philadelphia, PA)
Nebraska Appleseed Center for Law in the Public Interest (Lincoln, NE)
Network for Immigrant Justice (Eugene, OR)
New Jersey Immigration Policy Network (Newark, NJ)
New York Immigration Coalition (New York, NY)
North Carolina Justice and Community Development Center (Raleigh, NC)
North Carolina Justice Center (Raleigh, NC)
Northern California Coalition for Immigrant Rights (San Francisco, CA)
Office of Hispanic Ministry (Waterloo, IA)
Pennsylvania Family Economic Self-Sufficiency Project (Swarthmore, PA)
Pennsylvania Immigration and Citizenship Coalition (Philadelphia, PA)
Pennsylvania Immigration Resource Center (York, PA)
Pennsylvania Institutional Law Project (Philadelphia, PA)
Philadelphia Citizens for Children and Youth (Philadelphia, PA)
Philadelphia Council American Federation of Labor-Council of Industrial
Organizations (Philadelphia, PA)
Philadelphia Unemployment Project (Philadelphia, PA)
Philadelphia Volunteers for the Indigent Program (Philadelphia, PA)
Pinnacle Resources, LLC (Bakersfield, CA)
Public Justice Center (Baltimore, MD)
Refugee and Immigration Services, Catholic Diocese of Richmond
(Richmond, VA)
Rhode Island Coalition for Immigrants and Refugees (Providence, RI)
Rural Opportunities Inc. (Rochester, NY)
Service Employees International Union, Health Care Workers Local 250
(Oakland, CA)
Services, Immigrant Rights & Education Network (San Jose, CA)
Somos Un Pueblo Unido (Santa Fe, NM)
Southeast Asian Mutual Assistance Associations Coalition (Philadelphia,
PA)
Tennessee Immigrant and Refugee Rights Coalition (Memphis, TN)
UCLA Labor Center (Pasadena, CA)
UNITE (Washington, DC)
United Network for Immigrants and Refugee Rights (Chicago, IL)
United Way of King County (Seattle, WA)
United Way of Southeastern Pennsylvania (Philadelphia, PA)
USAction (Washington, DC)
Virginia Justice Center (Falls Church, VA)
Volunteer Accounting Service Team of Michigan (Detroit, MI)
Washington Lawyers' Committee for Civil Rights and Urban Affairs
(Washington, DC)
Watts/Century Latino Organization (Los Angeles, CA)
West Virginia School of Osteopathic Medicine (Lewisburg, WV)
Westside Community Action Network Center Inc. (Kansas City, MO)
Workers' Rights Law Center of New York (New Paltz, NY)
Young Korean American Service and Education Center (Flushing, NY)
Youth Empowerment Activists (Woodside, NY)