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One Business Filed 37,375 Bad W-2 Forms -- and Is Getting Away With It

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.

A single employer filed 37,375 W-2 forms in tax year 2005 on which the Social Security Number and the name did not match. These "no-match" W-2 forms often -- but not always -- represent an illegal-alien worker fraudulently using someone else's Social Security number or a fake number.

An employer who files 37,375 no-match W-2s in one year is almost certainly employing many thousands of illegal aliens -- and knows it.

Yet there is no indication our federal government has taken any action to stop this employer from continuing to employ mass numbers of illegal aliens.

The unemployment rate was 7.7 percent when President Barack Obama was inaugurated. It is now 9.5 percent.

The fact that a single employer filed 37,375 no-match W2s in 2005 was revealed in a virtually unnoticed Dec. 15, 2008, audit report from the inspector general of the Social Security Administration (SSA).

The purpose of this report was to examine the effectiveness of the so-called "Educational Correspondence" (EDCOR) that SSA sends out each year to all employers who file more than 10 no-match W-2s if those no-match W-2s also amount to at least one-half of one percent of the total number of W-2s filed by that employer.

These "no-match letters" list the Social Security numbers that were on the no-match W-2s the employer filed -- but only to a maximum of 500 Social Security numbers. Thus, if an employer files 37,375 bad W-2s, the letter it receives from SSA lists only the first 500 bad Social Security Numbers, not the other 36,875.

According to the inspector general, there were about 1,650 employers that filed more than 500 no-match W-2s in 2005. In fact, these 1,650 employers filed a total of about 2.6 million no-match W-2s in 2005, meaning they filed an average of 1,576 per employer.

The champion was the employer that filed 37,375.

To those unfamiliar with this issue, this might seem like an astounding number. If you care to double-check it, go to the Website of the inspector general of the Social Security Administration and look up the December 2008 audit report titled, "Effectiveness of Educational Correspondence to Employers." The number for the report is A-03-07-17105.

If President Obama cares to read the report, I would point him especially to page 7. "Our review found that about 1,650 employers with over 500 name/SSN no-matches had reported about 2.6 million no-matches to SSA," it says. "They received EDCOR letters that included 907,000 of the no-matches. Consequently, they were not informed of about 1.7 million no-matches. These employers had reported no-matches that ranged from 501 to 37,375, and about 44 percent of the employers had reported SSA (sic) 1,000 or more no-matches to SSA."

If recent history is a guide, it is not unprecedented for an employer to file tens of thousands of no-match W-2s in a single year. In October 2004, the SSA inspector general filed an audit report analyzing the 100 employers that had filed the largest number of bad W-2s in the five years from 1997-2001. The inspector general did not name these "Top 100" bad W-2 filers but did cite the states in which they were located.

America's No. 1 filer of bad W-2s was an Illinois-based company that filed 131,991 no-match W-2s from 1997-2001, for an average of 26,398 per year. The No. 2 filer of bad W-2s was a Texas-based company that filed 108,302 no-match W-2s from 1997-2001, for an average of 21,600 per year.

The Illinois employer, according to the inspector general, paid $5.4 billion in wages to employees whose Social Security numbers did not match their names.

The employer could have been paying that money to Americans and permanent legal residents entitled to work in the U.S. who have valid Social Security numbers and are quite happy to give them to their employers.

SSA will not give the Department of Homeland Security (DHS) the names of the employers who file massive numbers of no-match W-2s because they say that is protected tax information under Section 6103 of the Internal Revenue Code. Under the George W. Bush administration, DHS promulgated a regulation that instructed employers in how they could find "safe harbor" from having SSA's no-match letters used against them as evidence that they had knowingly hired illegal aliens. But a federal court in California suspended this regulation in 2008, and Secretary Napolitano rescinded it last year.

Rep. Steve King, the Iowa Republican, has introduced the New IDEA Act (HR 3580) that would make two key changes in federal tax law: It would prevent businesses from deducting from their taxable income the wages and benefits they pay illegal aliens, and it would make the IRS share information with DHS for enforcing immigration laws.

President Obama called on Congress last week to give amnesty to illegal aliens, which also means giving amnesty to businesses that routinely hire illegal aliens and file no-match W-2s with the federal government.

Congress should pass Steve King's bill instead.

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