Is the private security guard watching over your home or office an illegal alien? If so, is the government doing enough to fix the problem?
These questions must be asked because the inspector general of the Social Security Administration has discovered that a California-based security guard company employed 4,321 people in 2001 whom the company did not correctly identify on W-2 forms, often an indicator that a worker is an illegal alien.
The IG's office, however, believes current law prevents it from identifying this company not only to the public but also to the Department of Homeland Security and the State of California.
After the company in question filed 8,902 W-2 reports for 2001, SSA could not match 4,321 to known taxpayers. These were consigned to what SSA calls the Earnings Suspense File (ESF).
The IG mentioned the company in an October report analyzing (but not naming) the 100 companies that filed the most unmatchable W-2s from 1997 to 2001. The security-guard company was not specifically cited as one of the Top 100, but was mentioned in a section discussing the auditors' analysis of employers who filed at least 200 bad W-2s in 2001.
"Another service industry employer, a security guard service in California," said the report, "had almost 49 percent of its reported wage items posted to the ESF in TY (tax year) 2001. This employer reported 8,902 wage items, of which 4,321 did not match SSA's records and were posted to SSA's ESF. As a result, this employer posted more than $27 million in wages to the ESF."
I posed written questions to the IG's office about this passage and received written answers.
Question: What is the name of the security guard company? Or, if you believe federal law prevents you from releasing the name, could you please cite the specific applicable statute.
Answer: "The name of the California security guard company is protected under Section 6103 of the Internal Revenue Code, 'Confidentiality and Disclosure of Returns and Return Information' (Title 26 U.S.C. § 6103). As such, this tax information cannot be disclosed by SSA."
Question: Has the SSA IG notified any agency of the California government about this security guard company's problem with filing bad W-2s?
Answer: "With the exception of an ongoing criminal investigation, the same disclosure restrictions under Section 6103 of the Internal Revenue Code apply to sharing this information with outside parties, such as the State of California. To that end, our audit reports are intended to highlight trend analysis in the Earnings Suspense File so that agency management may take appropriate follow-up action."
Question: Has the SSA IG notified the Department of Homeland Security about this company and its problem?
Answer: "Again, with limited exception, Section 6103 of the Internal Revenue Code restricts the disclosure of such information. In our January 2001 report on Obstacles to Reducing Social Security Number Misuse in the Agriculture Industry, we recommended that SSA re-evaluate the application of existing disclosure laws or seek legislative authority to remove barriers that would allow SSA to share information regarding chronic problem employers with the other federal agencies such as the Department of Homeland Security. Until such disclosure restrictions are removed, we are unable to share this type of information outside the context of a criminal investigation."
Question: Has the SSA IG notified the Internal Revenue Service about this company and its problem?
Answer: "The sharing of information on employers with items in the Earning Suspense File is a function of the SSA's coordination efforts with the Internal Revenue Service. For example, the October 2004 report on 'Employers With the Most Suspended Wage Items in the 5-Year Period 1997 Through 2001' notes that in August 2002, SSA provided a listing to the IRS of all employers with more than 100 items in the ESF. We also noted how the IRS has visited a number of employers to review their recordkeeping."
Question: Is the SSA IG aware of any specific action that has been taken by the government to correct the problem with this security guard company? If so, what was that action?
Answer: "We are not aware of any specific actions to correct the problem. However, as noted in the report, each year SSA develops a national listing of employers who submit 100 or more suspended wage items. These lists are sent to regional Employer Service Liaison Officers (ESLO) for follow-up contacts with the employers. In this particular case, SSA's San Francisco-based ESLO would be in the best position to assist this employer."
The upshot of the IG's ability to share information with the IRS about companies filing bad W-2s is that, according to the Government Accountability Office, the IRS has never used its statutory authority to fine such companies.
Elsewhere, some steps have been taken to ameliorate the problem of security-guard companies' not properly identifying employees. Since 2003, security guards in California have been subjected to criminal background checks before they start working, and the intelligence reform law enacted in December allows security-guard companies in states that do not require background checks to voluntarily seek federal background checks through a qualified agency in their state.
In three years, when the REAL ID Act that was enacted last month is fully phased in and illegal aliens are no longer allowed in any state to get the same driver's licenses as legal residents, it will be easier for government agencies to positively identify exactly whose background they are checking.
But, in the meantime, these checks are based on an applicant's fingerprints, not his claimed Social Security Number, which means it's possible illegal aliens using bogus SSNs can slip through if they do not have criminal records.
"It is a criminal background check," Kevin Flanagan, spokesman for the California Department of Consumer Affairs, told me. "We check their fingerprints. But we don't verify their Social Security Number."