Is this a blessing or a curse for your department? IRS’ Information Reporting Program Advisory Committee (IRPAC) is recommending that companies only put part of employees’ and contractors’ Taxpayer Identification Numbers (TINs) on W-2s and 1099s and related forms. For example, you might have a form made out to John Smith, SSN 123-45-****.

The process, known as TIN masking, is needed because W-2s and 1099s are usually mailed. Given the sensitive information inside – and the prominent “Important Tax Document” notice on the front — they’re particularly vulnerable to being stolen and used to facilitate identity theft.

The value of TIN masking is clear — for payees. How much it benefits Payroll and A/P is still up for debate. It would give your company some protection from con artists trying to use your data for nefarious purposes. But because there are no firm guidelines on how exactly TIN masking would be handled, it’s impossible to say how much extra time and effort it would take you to comply. But the rules would most likely apply to Forms W-2, 1099, 1098 and 5498.

IRPAC made several suggestions for IRS to include when developing TIN masking guidance for companies, including the following requirements:

1. Working with state agencies, the Social Security Administration, taxpayers and Accounting pros to define criteria for when masking would apply and how it would be handled.
2. Educating the general public about what TIN masking would mean to them, and how they can ensure accuracy of their forms and the tax returns they file using those forms.
3. Looking for other ways to prevent identity theft.

Do you think it’s time to start TIN masking– or is it not worth the effort? Are there other trouble spots that leave companies and/or their workers vulnerable to fraud? Sound off in the comments.

Tags: 1099s, A/P, Best practices, Communication, Identity theft, IRS regs, Payroll, Tax compliance, Tax filing, Taxpayer Identification Numbers, W-2s