One company

Terry Jeffrey
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Posted: Mar 16, 2005 12:00 AM

Every year, the Social Security Administration consigns up to 9 million hopelessly inaccurate W-2 reports to Social Security limbo.

 It is called the Earnings Suspense File (ESF), and it is the final resting place of W-2s that cannot be matched to a known taxpayer. One company filed 33,448 of these inaccurate W-2s in one year.

 But will the government do anything about it?

 House Judiciary Chairman James Sensenbrenner asked the Government Accountability Office to look at the ESF. This month, GAO released a report (focusing on 1985-2000) that reveals a telling pattern.

 Orphaned W-2s do not emerge randomly from American business.

 "Forty-three percent of employers associated with earnings reports in the ESF are from only five of 83 broad industry categories," GAO reported. These include "eating and drinking establishments, construction and special trades, agricultural production-crops, business service organizations and health service organizations."

 At least some of the tendency in these industries to file inaccurate W-2s is driven by the hiring illegal aliens. Citing a report by SSA's inspector general, GAO says "SSA's experience is that employers who rely on a workforce consisting of relatively unskilled and migrant workers are the major source of suspended earnings."

 However, most businesses in these industries are not "egregious" filers of inaccurate W-2s. "Among these industry categories," says GAO, "a small portion of employers account for a disproportionate number of ESF reports."

 Between 1985 and 2000, only 8,900 employers filed 1,000 or more W-2s that ended up in the ESF, but those 8,900 accounted for more than 30 percent of ESF reports.

 Then there is the firm that filed 33,448 inaccurate W-2s in one year.

 "(W)e found that employers with a high number of reports in the ESF had a consistent pattern of misidentifying their workers on their annual earnings reports to SSA," said GAO. "For example, one employer averaged about 13,300 reports placed in the ESF per year over the period we analyzed, ranging from a low of 5,971 to a high of 33,448."

 When SSA cannot match a W-2 to a worker, it writes to the address on the W-2. "If the worker does not respond," says GAO, "SSA then sends a letter to the employer that filed the report soliciting assistance in resolving the problem."

 You would think employers who routinely file large numbers of these W-2s would figure out they were doing something wrong.

 You also would think the Department of Homeland Security, which enforces the immigration law, might also suspect they were doing something wrong and want to investigate exactly what it is.

 "Employers engaging in a pattern or practice of knowingly hiring or continuing to employ unauthorized workers can be subject to fines and imprisonment," says GAO.

 Citing competing demands for Homeland Security resources in a post-9/11 world, GAO says, "At present, it is unlikely that DHS will take enforcement action against employers and workers who submit inaccurate information to SSA to conceal unauthorized work activity."

 But, says GAO, "it is important that some level of coordination be re-established to best leverage SSA's data on potential unauthorized work activity and DHS staff resources to target the most egregious employers."

 Daniel Bertoni, a GAO analyst who worked on the report, told me GAO has the names of the 8,900 companies that filed at least 1,000 inaccurate W-2s between 1985 and 2000. It also has the name of the company that filed 33,448 in one year.

 Would GAO give the names to Homeland Security? "I would have to consult with attorneys in terms of access to tax information," he said. "If it were legal to do so, we would share the information to the fullest extent possible, certainly."

 I asked House Judiciary Chairman James Sensenbrenner if GAO should give Homeland Security the names. "Yes, I do believe the GAO should provide the compilation of employers sending deficient W-2s to the DHS," said Sensenbrenner. "And I believe that the DHS should establish a procedure for investigating those companies that continue to send bad W-2s year after year."

 Should Homeland Security immediately begin to investigate companies that routinely file large numbers of inaccurate W-2s to see if they are hiring large numbers of illegal aliens? "Absolutely," said Sensenbrenner. "And the administration should fund the 800 per year additional immigration internal enforcement officers authorized by last year's 9/11 Commission bill, and signed by the president."

 Do Americans have the right to know the name of the company that filed the 33,448 inaccurate W-2s in one year? "Yes," said Sensenbrenner. "I think the American people should know the name of every company that files more than 100 inaccurate W-2s every year.

 "Every community in America," he said, "has begun to recognize the hidden cost of employing illegal aliens, from over-crowded emergency rooms in bankrupt hospitals to schools overcrowded with indigent children who require special language teachers most school districts can't afford.

 "Sadly," he said, "many of these employers are in communities which already have high levels of unemployed U.S. citizens."