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.