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entitled 'Social Security: Better Coordination among Federal Agencies 
Could Reduce Unidentified Earnings Reports' which was released on March 
7, 2005.

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Report to Congressional Committees:

United States Government Accountability Office:

GAO:

February 2005:

Social Security:

Better Coordination among Federal Agencies Could Reduce Unidentified 
Earnings Reports:

GAO-05-154:

GAO Highlights:

Highlights of GAO-05-154, a report to congressional committees: 

Why GAO Did This Study:

Each year, the Social Security Administration (SSA) receives millions 
of employer-submitted earnings reports (Form W-2s) that it is unable to 
place in an individual Social Security record. If the Social Security 
number (SSN) and name on a W-2 do not match SSA’s records, the W-2 is 
retained in the Earnings Suspense File (ESF). SSA’s ability to match 
earnings reports is essential to calculating Social Security benefits. 
Because of concerns about the size of the ESF, GAO was asked to 
determine (1) how SSA processes workers’ earnings reports, (2) the 
types of errors in ESF reports and the characteristics of employers 
whose reports are in the ESF, (3) how often earnings from repeatedly 
used SSNs have been reinstated and who receives the earnings from 
theses reports, and (4) what key factors contribute to ESF postings.

What GAO Found:

Upon receiving over 250 million earnings reports annually from 
employers, SSA uses various processes to post such reports to workers’ 
Social Security records. For reports in which worker names and SSNs 
exactly match SSA’s information, the earnings are credited to the 
appropriate Social Security record. When SSA encounters earnings 
reports that do not match its records, SSA attempts to make a match 
through various automated processes. Such processes have allowed SSA to 
identify valid records for an average of 15 million reports annually. 
However, about 4 percent of the reports still remain unmatched and are 
retained in the ESF. SSA uses additional automated and manual processes 
to continue to identify valid records. The most recent data show that 
SSA posted (“reinstated”) over 2 million earnings reports in the ESF to 
valid records from such processes.

Earnings reports in the ESF have serious data problems and are 
particularly likely to be submitted by certain categories of employers. 
Such problems include missing SSNs and employer use of the same SSN for 
more than one worker in the same tax year. Additional problems include 
missing surnames or names that include nonalphabetic characters. Forty-
three percent of employers associated with earnings reports in the ESF 
are from only 5 of the 83 broad industry categories. Among these 
industry categories, a small portion of employers account for a 
disproportionate number of ESF reports.

SSA has reinstated a substantial number of earnings reports with SSNs 
that appear repeatedly in the ESF. We analyzed the most frequently 
occurring 295 SSNs, which appeared in ESF 1,000 times or more between 
tax years 1985 and 2000. Of the earnings reports associated with these 
SSNs, SSA reinstated 13.1 million to the records of about 11.7 million 
workers. Although most reinstatements were for U.S.-born workers, in 
recent years the percentage of reinstatements to foreign-born workers 
has markedly increased. Also increasing is the percentage of foreign-
born workers that received reinstatements for earnings in years prior 
to receiving a valid SSN—a potential indicator of unauthorized 
employment.

Three major factors contribute to ESF postings. Under IRS regulations, 
employers must ask new hires to provide their name and SSN, but are not 
required to independently corroborate this information with SSA. DHS 
requires employers to visually inspect new workers’ identity and work 
authorization documents, but employers do not have to verify these 
documents, and they can be easily counterfeited. Further, IRS 
regulations are minimal; IRS has no record of assessing a penalty for 
filing inaccurate earnings reports; and DHS enforcement efforts against 
employers who knowingly hire unauthorized workers has been limited in 
recent years because of shifting priorities following the events of 
September 11, 2001. Last, although SSA and DHS offer employers 
verification free of charge, these services are voluntary, have some 
limitations, and remain underutilized.

What GAO Recommends:

GAO recommends that the Commissioners of SSA and the Internal Revenue 
Service (IRS) and the Secretary of the Department of Homeland Security 
(DHS) work on several fronts to facilitate more accurate earnings 
reporting by employers, enhance verification systems, and institute 
effective data sharing to deter unauthorized work activity and ESF 
postings. SSA, IRS, and DHS agreed to consider our recommendations, 
provided clarifying information, and described initiatives planned or 
under way to enhance earnings reporting and worker verification. 

www.gao.gov/cgi-bin/getrpt?GAO-05-154.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Barbara D. Bovbjerg at 
(202) 512-7215 or bovbjergbj@gao.gov.

[End of section]

Contents:

Letter:

Results in Brief:

Background:

SSA Uses Electronic and Manual Processes to Match Earnings Reports to 
Appropriate Records:

ESF Earnings Reports Frequently Include Inaccurate and Missing 
Information:

Earnings from Frequently Used SSNs Are Often Reinstated and 
Increasingly Belong to Foreign-Born Workers:

Several Key Factors Contribute to ESF Postings:

Conclusions:

Recommendations:

Agency Comments and Our Evaluation:

Appendix I: Objectives, Scope, and Methodology:

Appendix II: Comments from the Social Security Administration:

Appendix III: Comments from the Internal Revenue Service:

Appendix IV: Comments from the Department of Homeland Security:

Appendix V: GAO Contacts and Staff Acknowledgments:

GAO Contacts:

Staff Acknowledgments:

Tables:

Table 1: Number of Earnings Reports and Related Amounts in the ESF, by 
Decade:

Table 2: Number of Earnings Reports with Initially Invalid Identity 
Information That SSA Corrected Via the Upfront Validation Routines 
(1998-2002):

Table 3: Number of Earnings Reports That SSA Reinstated to Correct 
Records Using Selected Back-End Routines for Tax Year 2001:

Table 4: Use of One SSN by an Employer for Multiple Workers on Earnings 
Reports in a Tax Year (1985-2000):

Table 5: Employers with Earnings Reports in the ESF Using One SSN More 
than Once in a Tax Year (1985-2000):

Table 6: Range of Number of Employers' Earnings Reports Recorded in the 
ESF, as of January 2003 (Tax Years 1985-2000):

Table 7: Ranges of Unposted Earnings Associated with the 9.58 Million 
Items in the ESF under the 295 SSNs Analyzed:

Table 8: Percentage of Reinstatement Recipients Reviewed Who Were 
Foreign-Born, by Year:

Table 9: Analysis of Foreign-Born Persons Receiving Reinstatements from 
Repeatedly Used SSNs, Grouped by Countries of Birth:

Table 10: Percentage of Reinstatements to Foreign-Born Persons with 
Earnings before Receipt of SSN, by Year of Earnings:

Figures:

Figure 1: Flowchart of SSA's Process for Posting Earnings Reports to 
Workers' Social Security Records:

Figure 2: Employers Reporting Earnings in the ESF, by Type of Business:

Figure 3: Employer Investigations and Notices of Intent to Fine Letters 
Issued, Fiscal Years 1992 to 2002:

Figure 4: Investigative Work Years and Arrests of Unauthorized Workers, 
Fiscal Years 1999 to 2003:

Abbreviations:

DHS: Department of Homeland Security:

ESF: Earnings Suspense File:

ESLO: Employer Service Liaison Officer:

ICOR: Item Correction:

IIRIRA: Illegal Immigration Reform and Immigrant Responsibility Act:

IRCA: Immigration Reform and Control Act:

IRS: Internal Revenue Service:

MEF: Master Earnings File:

OIG: Office of the Inspector General:

PEBES: Personal Earnings and Benefit Estate Statements:

SSA: Social Security Administration:

SSN: Social Security number:

United States Government Accountability Office:

Washington, DC 20548:

February 4, 2005:

The Honorable F. James Sensenbrenner, Jr.: 
Chairman: 
Committee on the Judiciary: 
House of Representatives:

The Honorable Jim McCrery: 
Chairman: 
Subcommittee on Social Security: 
Committee on Ways and Means: 
House of Representatives:

The Honorable E. Clay Shaw, Jr.: 
Committee on Ways and Means: 
House of Representatives:

The Social Security Administration (SSA) manages benefit programs that 
cover nearly all working Americans. To carry out this responsibility, 
SSA must maintain records of workers' earnings because they are the 
basis for calculating benefits for workers and their dependents. Each 
year, SSA receives over 250 million earnings reports (Form W-2s). SSA 
posts earnings to its records based on the name and Social Security 
number (SSN) submitted with each earnings report. If the SSN or name 
does not match SSA's records, the reported earnings amount is placed in 
an Earnings Suspense File (ESF), where it remains until SSA obtains 
evidence to link the unidentified earnings to a valid SSN--a process 
termed "earnings reinstatement." Earnings reports with incorrect or 
incomplete information have been a long standing problem, and in 2002, 
SSA was unable to post to valid worker records almost 9 million reports 
representing $56 billion in earnings. In November 2004, SSA reported 
that the ESF contained a combined total of 246 million earnings records 
from all tax years back to the inception of the Social Security program 
(1937), representing about $463 billion in reported earnings. Because 
of your concerns about the size of the ESF, and the potentially 
negative consequences for benefit payments and tax administration 
associated with incorrect earnings records, you asked us to determine 
(1) how SSA processes workers' earnings reports, (2) the types of 
errors in ESF reports and the characteristics of employers whose 
reports are in the ESF, (3) how often earnings from repeatedly used 
SSNs have been reinstated and who receives the earnings from these 
reports, and (4) what key factors contribute to ESF postings.

To complete our work, we met with SSA officials to obtain information 
on the various electronic processes SSA uses to resolve errors and post 
earnings to worker records. We also visited a total of eight SSA field 
offices located in New York, New Jersey, Virginia, and California that 
had significant reinstatement activity to observe and document SSA's 
manual procedures for reviewing and validating evidence submitted by 
individuals seeking reinstated earnings. To determine the 
characteristics of ESF earnings and assess reinstatement activity, we 
obtained and analyzed an electronic copy of the ESF for tax years 1985 
to 2000 (84.6 million records). As part of our analysis, we assessed 
the reliability of the ESF by reviewing recent SSA, Inspector General, 
and contractor reports; interviewing agency officials; and checking the 
databases for consistency. To analyze reinstatement of earnings 
reported under repeatedly used SSNs, we selected 295 SSNs that appeared 
most frequently in the ESF--each appeared 1,000 or more times. We 
tracked the number of reinstatements associated with these SSNs since 
the inception of the program and examined the characteristics of the 
workers whose earnings had been reinstated. We also documented the 
tools SSA makes available to employers to assist them in verifying 
SSNs, reviewed Internal Revenue Service (IRS) regulations requiring 
employers to solicit and document worker names and SSNs, and 
interviewed key officials responsible for enforcing those regulations. 
We also reviewed reports on the ESF prepared by SSA's Office of the 
Inspector General (OIG) and private contractors. Finally, we met with 
officials from the Department of Homeland Security (DHS) to document 
the agency's efforts to enforce laws that prohibit employers from 
knowingly hiring workers who are not authorized to work in the United 
States and to obtain information about DHS's worker verification 
service. Our work was conducted between October 2002 and December 2004 
in accordance with generally accepted government auditing standards. 
(See app. I for more details about our methodology and scope.)

Results in Brief:

SSA uses various processes to post earnings reports to workers' Social 
Security records. For reports where worker names and SSNs exactly match 
SSA's information, the earnings reports are credited to the appropriate 
Social Security record. About 10 percent of initial submissions, 
however, do not match SSA' s records, and the agency attempts to obtain 
a match through automated processes that it refers to as "validation 
routines." For each of these earnings reports, the agency conducts over 
20 validation routines that address possible errors in worker names, 
such as spelling or in SSN numbering sequence. Such routines have 
allowed SSA to identify the correct SSN record and post an average of 
15 million reports annually over the past 5 years. However, almost 9 
million reports (about 4 percent of all reports) remain unmatched even 
after the above validation routines and are, therefore, placed in the 
ESF. Subsequently, SSA employs additional automated and manual 
routines, including requesting updated information from workers and 
employers to reconcile the earnings reports. Some of these processes 
take place in SSA field offices. For example, SSA field staff may 
interview workers seeking reinstatements, review the evidentiary 
documents submitted, and credit the reported earnings to their Social 
Security records. The most recent reinstatement data available show 
that for tax year 2001 earnings reports, SSA posted about 600,000 
earnings reports from the ESF, representing about $4 billion in 
reported earnings. Other processes applied to a range of filing years 
have recently reinstated an additional 1.9 million reports.

Many of the earnings reports in the ESF that we examined have serious 
data problems and are particularly likely to be submitted by certain 
types of employers. Of the 84.6 million records placed in the ESF for 
tax years 1985-2000, about 9 million had all zeros (e.g., 000-00-0000) 
in the SSN field. For 3.5 million records, employers used the same SSN 
to report earnings for multiple workers in a single tax year. About 1.4 
million records had SSNs that had never been issued by SSA, and over 
260,000 were missing a first name. Certain types of employers were most 
frequently associated with incorrect earnings reports. For example, 
limited data provided by SSA show that 43 percent of the employers with 
earnings reports in the ESF are from only 5 of the 83 broad industry 
categories, with "eating and drinking establishments" and "construction 
and special trades" being the top 2. A small portion of employers also 
account for a disproportionate number of ESF reports. For example, only 
about 8,900 employers--0.2 percent of all employers with reports 
recorded in the ESF for tax years 1985-2000--submitted over 30 percent 
of the reports we analyzed.

SSA eventually reinstated a substantial number of earnings reports 
associated with SSNs that appeared repeatedly in the ESF; a growing 
number of reinstatements have been to the Social Security records of 
foreign-born workers. We analyzed 295 distinct SSNs that appeared in 
ESF 1,000 times or more between tax years 1985 and 2000. Of the 
earnings reports associated with these SSNs, SSA reinstated 13.1 
million to the records of about 11.7 million individuals. Historically, 
most workers receiving reinstatements were U.S.-born males. However, in 
more recent years, the percentage of foreign-born workers receiving 
such reinstatements has markedly increased, from about 8 percent before 
1986 to almost 21 percent in 2003. Workers born in Mexico, Canada, 
Germany, and Cuba represented nearly 40 percent of all foreign-born 
individuals receiving such reinstatements. Further, in 2003 about 47 
percent of foreign-born workers with reinstatements from repeatedly 
used SSNs had earnings prior to actually receiving a valid SSN--a 
potential indicator of unauthorized employment.

Limited requirements for obtaining and reporting accurate worker names 
and SSNs, IRS enforcement weaknesses and limited DHS worksite 
enforcement efforts, and underutilization of employee verification 
systems create an environment in which false names and SSNs can be used 
for employment purposes, and in these cases earnings records frequently 
cannot be associated with the correct Social Security record. IRS 
requires employers to solicit newly hired workers' names and SSN 
information on IRS Form W-4 (Employee's Withholding Allowance 
Certificate) that workers must complete. However, employers rely 
primarily on workers to self-report this information, with no 
independent corroboration by employers. While DHS's employer reporting 
requirements are somewhat more demanding than IRS's, employers still 
rely primarily on visual inspections of documents demonstrating 
identity and work authorization, such as driver's licenses, Social 
Security cards, and immigration documents to establish identity and 
work authorization. Such documents can be easily counterfeited, and DHS 
lacks reasonable assurance that employers will detect individuals using 
them. Further, IRS's reporting requirements are minimal, and IRS has no 
record of ever assessing a penalty against an employer for filing 
inaccurate earnings reports. DHS enforcement activities and sanctions 
against employers who hire unauthorized workers are also limited. 
Following the events of September 11, 2001, DHS has focused its limited 
worksite enforcement efforts primarily on critical infrastructure 
facilities, such as airports and power plants, where unauthorized 
workers could pose security threats, rather than on industries most 
commonly associated with ESF postings. Further, although earnings 
reports may involve illegal work activity, DHS has not used data 
regularly supplied by SSA on potential unauthorized workers and their 
employers. Although both SSA and DHS offer employers free verification 
services, these services are voluntary, have some limitations, and 
remain underutilized.

We are recommending that the Commissioners of the Social Security 
Administration and the Internal Revenue Service and the Secretary of 
Homeland Security work collaboratively on several fronts to facilitate 
more accurate earnings reporting by employers, enhance existing 
electronic verification systems, and institute more effective data 
sharing to deter erroneous earnings postings and unauthorized SSN use.

SSA, IRS, and DHS generally agreed with our recommendations, provided 
additional clarifying information regarding their roles in the current 
process for soliciting and verifying worker information, and noted 
various initiatives that are either planned or under way to address our 
recommendations. Their comments are reproduced in appendixes II, III, 
and IV.

Background:

Social Security benefits are based on a worker's lifetime earnings in 
covered employment. As the agency responsible for issuing SSNs and 
paying retirement, survivors, and disability benefits to insured 
persons, SSA must have accurate records of every worker's earnings. 
Inaccurate earnings records can create benefit payment errors.

Through a process known as enumeration, SSA assigns a unique SSN to 
each individual who meets the requirements for one. Currently, SSNs are 
issued to most U.S. citizens at birth. They are also available to 
noncitizens lawfully admitted to the United States with permission to 
work. Lawfully admitted noncitizens may also qualify for an SSN for 
nonwork purposes when a federal, state, or local law requires that they 
have an SSN to obtain a particular public benefit or service. SSA must 
obtain documentary evidence from such applicants regarding their age, 
identity, U.S. citizenship, or lawful alien status, and if they were 
previously assigned an SSN. Thus, SSA maintains a historical record of 
each worker's annual earnings, which is identified by the worker's name 
and Social Security number.[Footnote 1]

The earnings reporting process begins at the end of each calendar year, 
when employers submit reports of their workers' earnings to SSA on IRS 
Form W-2 (Wage and Tax Statement). To prepare the W-2, employers 
generally use certain information that workers provide on Form W-4, 
which is the document that determines the amount of federal income 
taxes that will be withheld from the worker's pay. If the SSN and name 
on an earnings report submitted by the employer do not match 
information in SSA's Master Earnings File (MEF), the reported earnings 
are placed in the ESF, which is a repository for earnings reports for 
unidentified workers. The ESF is an online file that can be updated 
throughout the day by all SSA field offices and various centralized 
components, although the updates are performed via batch mode. Removal 
of earnings reports from the ESF occurs only when a report can be 
matched and posted to a worker's MEF record. This process is termed 
"reinstatement" by SSA. Thus, the number of reports in ESF on a given 
day fluctuates as earnings are reinstated to the correct Social 
Security records. Table 1 reflects the ESF reports remaining, listed by 
decade, corresponding to the tax year of earnings for which each report 
applied, since inception of the Social Security program.

Table 1: Number of Earnings Reports and Related Amounts in the ESF, by 
Decade:

Dollars in billions.

Decade: 1937-39[A]; 
Number of reports: 8,908,235; 
Uncredited earnings: $0.6.

Decade: 1940-49; 
Number of reports: 19,764,525; 
Uncredited earnings: $2.0.

Decade: 1950-59; 
Number of reports: 22,155,420; 
Uncredited earnings: $3.6.

Decade: 1960-69; 
Number of reports: 28,294,126; 
Uncredited earnings: $6.7.

Decade: 1970-79; 
Number of reports: 44,402,863; 
Uncredited earnings: $22.7.

Decade: 1980-89; 
Number of reports: 41,928,484; 
Uncredited earnings: $77.3.

Decade: 1990-99; 
Number of reports: 51,950,009; 
Uncredited earnings: $188.9.

Decade: 2000-02[A]; 
Number of reports: 28,339,912; 
Uncredited earnings: $161.0.

Total; 
Number of reports: 245,743,574; 
Uncredited earnings: $462.8.

Source: GAO analysis of SSA data.

[A] In November 2004, SSA provided us with a summary of the items in 
the ESF showing the number of earnings reports and their dollar amount 
remaining in the ESF by year of earnings. The data reflect only partial 
decade information for indicated years.

[End of table]

SSA Uses Electronic and Manual Processes to Match Earnings Reports to 
Appropriate Records:

SSA uses various processes to post reported workers' earnings to valid 
Social Security records. Generally, employers send SSA one W-2 each 
year that reports the annual earnings for each of their workers. Upon 
receipt of these earnings reports, SSA electronically validates whether 
it has established a Social Security record for the reported SSN and 
surname shown on the W-2. SSA does this by electronically matching the 
worker's surname and SSN on the W-2 to information in its number 
identification file (Numident) that contains demographic information 
about every SSN holder. When the SSN and the first seven characters of 
the surname are identical on the W-2 and the Numident file, SSA posts 
those earnings to the indicated record in its MEF. SSA is able to place 
about 90 percent of employer-submitted earnings reports received each 
year in an appropriate MEF record. (Fig. 1 shows SSA's process in more 
detail.)

Figure 1: Flowchart of SSA's Process for Posting Earnings Reports to 
Workers' Social Security Records:

[See PDF for image]

[End of figure]

For the 10 percent of the reports that fail this initial validation 
test, SSA performs more than 20 of what it calls "front-end validation 
routines" that manipulate either the reported name or the SSN in a 
variety of ways to correct common reporting mistakes so that SSA can 
find an MEF record and prevent the posting of the earnings to the ESF. 
SSA's front-end routines identify Social Security records for about 60 
percent of the reports that are initially categorized as mismatches 
each year. In manipulating worker information to find a valid record, 
the automated front-end routines assume either the SSN is correct and 
there is a problem in the reported name or vice versa. For example, one 
front-end routine for reported name errors tests whether the first name 
and the surname have been reversed on the employer-filed W-2. The name 
reversal routine compares the first name from SSA's Numident file with 
the surname on the W-2. If they are the same and the first initial for 
the middle and surname match the information on the W-2, then SSA 
assumes it has found the proper record and posts the earnings. Other 
front-end routines check whether digits in the SSN are transposed or 
inaccurate or whether the name on the report contains transposed or 
missing letters. Another front-end routine involves searching for 
reinstated items that in the past have included the same reporting 
error occurring in the current year's earnings report.

Over the past several years, such routines have allowed SSA to post an 
annual average of 15 million earnings reports to individual MEF 
records, rather than to the ESF. Table 2 summarizes the performance of 
these front-end routines for the past 5 reporting years. It shows that 
SSA found about 76 million valid records for reported earnings for tax 
years 1998 to 2002.

Table 2: Number of Earnings Reports with Initially Invalid Identity 
Information That SSA Corrected Via the Upfront Validation Routines 
(1998-2002):

Year earnings were processed: 1998; 
Millions of reports not initially matching SSA records: 23.9. 

Year earnings were processed: 1999; 
Millions of reports not initially matching SSA records: 25.8. 

Year earnings were processed: 2000; 
Millions of reports not initially matching SSA records: 28.4. 

Year earnings were processed: 2001; 
Millions of reports not initially matching SSA records: 24.4. 

Year earnings were processed: 2002[A]; 
Millions of reports not initially matching SSA records: 21.9. 

Total; 
Millions of reports not initially matching SSA records: 124.4.

Year earnings were processed: 1998; 
Millions of corrected reports: 15.9. 

Year earnings were processed: 1999; 
Millions of corrected reports: 16.7. 

Year earnings were processed: 2000; 
Millions of corrected reports: 17.6. 

Year earnings were processed: 2001; 
Millions of corrected reports: 13.6. 

Year earnings were processed: 2002[A]; 
Millions of corrected reports: 12.0. 

Total; 
Millions of corrected reports: 75.8.

Percentage corrected; 
Year earnings were processed: 1998; 
Percentage corrected: 66.4%. 

Year earnings were processed: 1999; 
Percentage corrected: 64.7%. 

Year earnings were processed: 2000; 
Percentage corrected: 62.1%. 

Year earnings were processed: 2001; 
Percentage corrected: 56.0%. 

Year earnings were processed: 2002[A]; 
Percentage corrected: 54.8%. 

Total; 
Percentage corrected: 61.0%.

Source: GAO analysis of SSA data.

[A] Data as of November 2004.

[End of table]

If the front-end routines do not identify a valid record, SSA posts the 
earnings in the ESF. SSA subsequently performs what it calls "back-end" 
processes on the items, consisting of electronic and manual actions to 
match the earnings to a worker's MEF record. For one such process, SSA 
uses corrections of reported names and SSNs generated under IRS's 
automated routines. SSA then attempts to find the W-2 in the ESF and 
validate the corrected name and SSN that IRS provides against SSA's 
records; when both conditions are met, SSA accepts IRS's corrections 
and reinstates the item to the worker's record. Under another process, 
which SSA calls decentralized correspondence, or DECOR, SSA sends 
letters to addresses listed on each invalid W-2, seeking information to 
resolve the identity issue (or to the employer if the W-2 lacks a valid 
address). If the worker does not respond, SSA then sends a letter to 
the employer that filed the report soliciting assistance in resolving 
the problem. Other types of correspondence involve Young Child Earnings 
Records and Earnings After Death, for which SSA sends letters to 
employers and/or the persons whose SSNs appear on the reports; SSA 
automatically posts such earnings reports to the ESF because the 
persons named in the reports are, respectively, either (a) 6 years of 
age or younger (thus unlikely to have earnings through employment) or 
(b) have a date of death recorded on their Numident record for a year 
prior to the tax year for which earnings on Form W-2 have been 
reported. Upon receiving satisfactory documentation clarifying the 
earnings and linking them to the proper SSN, SSA reinstates earnings 
reports to the individuals' MEF record.

SSA also uses yet another process, known as FERRET, that compares 
worker addresses on the W-2 with addresses that IRS has from individual 
tax returns. In its Operation 30 routine, SSA staff compare ESF 
earnings reports with valid SSNs with information in the Numident 
record. Staff check whether nicknames, surname derivations, and other 
obvious mistakes in spelling might be the cause of the posting problem. 
Table 3 shows that in 2001 (the last year for which data were 
available), selected back-end routines reinstated almost 600,000 
earnings reports totaling almost $4 billion.

Table 3: Number of Earnings Reports That SSA Reinstated to Correct 
Records Using Selected Back-End Routines for Tax Year 2001:

Dollars in millions.

Back-end reinstatement routine: IRS corrections (mismatch resolutions 
by IRS sent to SSA); 
Items reinstated: 398,307; 
Earnings reinstated: $2,608.7.

Back-end reinstatement routine: FERRET; 
Items reinstated: 97,145; 
Earnings reinstated: $557.3.

Back-end reinstatement routine: W-2 corrections submitted by employers; 
Items reinstated: 60,791; 
Earnings reinstated: $529.7.

Back-end reinstatement routine: Operation 30; 
Items reinstated: 29,661; 
Earnings reinstated: $202.2.

Back-end reinstatement routine: Correspondence routines: DECOR; 
Items reinstated: 2,980; 
Earnings reinstated: $20.6.

Back-end reinstatement routine: Correspondence routines: Young child 
earnings records; 
Items reinstated: 499; 
Earnings reinstated: $5.1.

Back-end reinstatement routine: Correspondence routines: Earnings after 
death; 
Items reinstated: 127; 
Earnings reinstated: $1.3.

Total; 
Items reinstated: 589,510; 
Earnings reinstated: $3,924.8.

Source: SSA.

[End of table]

SSA has two other electronic back-end routines that have produced a 
large number of reinstatements. In a process called SWEEP, SSA 
periodically reruns ESF items through its records to determine whether 
updated information has been added to the Numident or whether newly 
developed validation routines might permit reinstatements. In 2003, SSA 
reinstated 123,741 items through SWEEP, covering tax years 1977-2001. 
GAP SWEEP is a newly developed routine that scans earnings records for 
valid SSNs in the ESF and assesses whether yearly gaps in earnings 
exist in the MEF record and might be linked to similar earnings in the 
ESF.[Footnote 2] If a link can be made, SSA uses slightly less 
stringent name match rules; if the name can be validated, the item is 
reinstated. As of May 2003, SSA has reinstated through the GAP SWEEP 
routine over 1.5 million items (across all tax years back to 1937), 
representing $6.1 billion in earnings.

Still another back-end process involves a manual review of worker- 
submitted evidence and a check of automated data. Workers (and their 
dependents and survivors) may visit local SSA offices to have earnings 
reinstated through the Item Correction (ICOR) process. Individuals 
provide SSA staff with evidence, such as W-2s, earnings statements, and 
tax returns, to document earnings that are missing from their Social 
Security record. Upon receiving adequate proof that links an earnings 
report to the individual, SSA field staff manually reinstate the 
earnings, subject to an accuracy check by a peer or supervisor. SSA 
provided information indicating that in fiscal year 2003, field staff 
had made about 244,000 earnings reinstatements through the ICOR process.

Furthermore, each year SSA mails a Social Security statement to workers 
and former workers age 25 and over who are not yet receiving 
benefits.[Footnote 3] The statement lists the amount of earnings posted 
to the person's Social Security record by year and encourages persons 
to contact SSA about any missing earnings. Such earnings might have 
been placed in the ESF because of a name or SSN mismatch. 
Reinstatements related to Social Security statements are included in 
the ICOR data discussed above.

ESF Earnings Reports Frequently Include Inaccurate and Missing 
Information:

Earnings reports in the ESF have serious data problems. Such data 
problems include missing SSNs or names, never issued numbers, and 
employer use of the same SSN to report earnings for multiple workers in 
a single tax year. In addition, a small portion of employers account 
for a disproportionate number of ESF reports, and employers in certain 
industry categories are more likely than others to submit reports with 
invalid worker identity information.

ESF Reports Have Serious Data Problems:

Out of the 84.6 million reports in the ESF for the 16 tax years that we 
examined (1985-2000), some of the more serious or obvious problems were 
that:

* 8.9 million had all zeros in the SSN field[Footnote 4] and:

* 1.4 million had reported SSNs that were never issued.

In addition, over 270,000 of the reports had various name problems. For 
example,

* 60,476 had no surname;

* 261,744 had no first name;

* 3,760 reports contained nonalphabetic characters in the name field, 
such as ?, /, %, <, &, *, @, even though SSA has developed automated 
routines to delete such characters from the name field.[Footnote 5]

For the 16-year period we examined, we also found that some employers 
used one SSN to report earnings for more than one worker in a given tax 
year.[Footnote 6] Table 4 depicts the number of times that employers 
used one SSN to report earnings of multiple workers in a tax year. For 
example, one case we found involved 10 W-2s in the ESF under one SSN 
for tax year 2000 from one employer. Each of the reports under the SSN 
had different names and different earnings, and together the earnings 
on the 10 reports totaled about $44,000. Table 4 shows that employers 
used one SSN in 10 different reports in a single tax year and did this 
308 times over the 16-year period of analysis. These employer reports 
accounted for 3,080 W-2s with $4.7 million in earnings recorded in the 
ESF. Table 4 also shows that most employers using one SSN to report 
earnings for multiple workers did this for relatively few reports (from 
2 to 9). However, there were a few employers who used one SSN for over 
100 reports (128 separate occurrences--see shaded area of table 4). The 
most egregious case that we identified involved an employer who used 
one SSN for 2,580 different earnings reports in a tax year.

Table 4: Use of One SSN by an Employer for Multiple Workers on Earnings 
Reports in a Tax Year (1985-2000):

Dollars in millions.

Frequency of SSN Use: 2-9; 
Number of occurrences in a tax year: 1,665,970; 
Total number of W-2s: 3,456,746; 
Total unposted earnings: $10,275.1.

Frequency of SSN Use: 10; 
Number of occurrences in a tax year: 308; 
Total number of W-2s: 3,080; 
Total unposted earnings: $4.7.

Frequency of SSN Use: 11-50; 
Number of occurrences in a tax year: 1,596; 
Total number of W-2s: 30,731; 
Total unposted earnings: $31.8.

Frequency of SSN Use: 51-100; 
Number of occurrences in a tax year: 134; 
Total number of W-2s: 9,090; 
Total unposted earnings: $10.7.

Frequency of SSN Use: 101-150; 
Number of occurrences in a tax year: 51; 
Total number of W-2s: 6,227; 
Total unposted earnings: $6.1.

Frequency of SSN Use: 151-200; 
Number of occurrences in a tax year: 27; 
Total number of W-2s: 4,596; 
Total unposted earnings: $3.3.

Frequency of SSN Use: 201-250; 
Number of occurrences in a tax year: 13; 
Total number of W-2s: 2,874; 
Total unposted earnings: $1.8.

Frequency of SSN Use: 251-300; 
Number of occurrences in a tax year: 7; 
Total number of W-2s: 1,899; 
Total unposted earnings: $5.2.

Frequency of SSN Use: 301-400; 
Number of occurrences in a tax year: 13; 
Total number of W-2s: 4,413; 
Total unposted earnings: $2.4.

Frequency of SSN Use: 401-500; 
Number of occurrences in a tax year: 9; 
Total number of W-2s: 3,966; 
Total unposted earnings: $3.4.

Frequency of SSN Use: Over 500; 
Number of occurrences in a tax year: 8; 
Total number of W-2s: 6,876; 
Total unposted earnings: $4.8.

Frequency of SSN Use: Total; 
Number of occurrences in a tax year: 1,668,136; 
Total number of W-2s: 3,530,498; 
Total unposted earnings: $10,349.4[A].

Source: GAO analysis of ESF data.

Note: Data for the 128 instances of employers using the same SSN in a 
tax year to report the earnings of more than one worker under the same 
SSN over 100 times are highlighted.

[A] Column does not sum because of rounding.

[End of table]

Some employers exhibited a pattern of such errors year after year. 
Between 1985 and 2000, about 61,000 employers used one SSN for more 
than one worker in multiple tax years. Table 5 shows that most 
employers using one SSN to report earnings for multiple workers did 
this in a period ranging between 1 and 9 years. However, there were 
slightly over 1,000 employers who used one SSN to report the earnings 
of more than one worker in 10 or more of the 16 tax years that we 
analyzed (see shaded area of table 5). We found 43 employers did this 
every year of the entire 16-year period we analyzed.

Table 5: Employers with Earnings Reports in the ESF Using One SSN More 
than Once in a Tax Year (1985-2000):

Dollars in millions.

Number of tax years: 1; 
Number of employers using an SSN in a tax year more than once to report 
earnings: 170,673; 
Number of W-2s filed by the employers using an SSN more than once in a 
tax year: 876,487; 
Total uncredited earnings: $3,032.7.

Number of tax years: 2-5; 
Number of employers using an SSN in a tax year more than once to report 
earnings: 55,966; 
Number of W-2s filed by the employers using an SSN more than once in a 
tax year: 1,530,702; 
Total uncredited earnings: $4,603.0.

Number of tax years: 6-9; 
Number of employers using an SSN in a tax year more than once to report 
earnings: 4,286; 
Number of W-2s filed by the employers using an SSN more than once in a 
tax year: 628,801; 
Total uncredited earnings: $1,634.3.

Number of tax years: 10; 
Number of employers using an SSN in a tax year more than once to report 
earnings: 318; 
Number of W-2s filed by the employers using an SSN more than once in a 
tax year: 88,857; 
Total uncredited earnings: $203.9.

Number of tax years: 11; 
Number of employers using an SSN in a tax year more than once to report 
earnings: 241; 
Number of W-2s filed by the employers using an SSN more than once in a 
tax year: 88,506; 
Total uncredited earnings: $216.7.

Number of tax years: 12; 
Number of employers using an SSN in a tax year more than once to report 
earnings: 166; 
Number of W-2s filed by the employers using an SSN more than once in a 
tax year: 70,798; 
Total uncredited earnings: $164.7.

Number of tax years: 13; 
Number of employers using an SSN in a tax year more than once to report 
earnings: 102; 
Number of W-2s filed by the employers using an SSN more than once in a 
tax year: 54,528; 
Total uncredited earnings: $114.3.

Number of tax years: 14; 
Number of employers using an SSN in a tax year more than once to report 
earnings: 85; 
Number of W-2s filed by the employers using an SSN more than once in a 
tax year: 37,183; 
Total uncredited earnings: $81.4.

Number of tax years: 15; 
Number of employers using an SSN in a tax year more than once to report 
earnings: 57; 
Number of W-2s filed by the employers using an SSN more than once in a 
tax year: 59,591; 
Total uncredited earnings: $151.4.

Number of tax years: 16; 
Number of employers using an SSN in a tax year more than once to report 
earnings: 43; 
Number of W-2s filed by the employers using an SSN more than once in a 
tax year: 95,045; 
Total uncredited earnings: $147.7.

Total; 
Number of employers using an SSN in a tax year more than once to report 
earnings: 231,937; 
Number of W-2s filed by the employers using an SSN more than once in a 
tax year: 3,530,498; 
Total uncredited earnings: $$10,349.4[A].

Source: GAO analysis of ESF data.

Note: Data for the 1,012 employers who used the same SSN to report the 
earnings of more than one worker in 10 or more years are highlighted.

[A] Column does not sum because of rounding.

[End of table]

A Few Employers and Certain Types of Industries Have a Disproportionate 
Number of Reports in the ESF:

The majority of employers submitted a relatively small number of the 
total number of earnings reports in the ESF. For example, table 6 shows 
that 3.4 million employers had fewer than 10 reports for the period we 
analyzed. In contrast, while only about 8,900 employers (0.2 percent of 
all employers with reports recorded in the ESF for tax years 1985-2000) 
had 1,000 or more reports in the ESF, they accounted for over 30 
percent of the total number of ESF reports (see shaded area of table 6).

Table 6: Range of Number of Employers' Earnings Reports Recorded in the 
ESF, as of January 2003 (Tax Years 1985-2000):

Range of earnings reports in the ESF: 1-9; 
Number of employers: Number: 3,433,185; 
Number of employers: Percent: 80.5%; 
Number of earnings reports in ESF: Number: 8,703,653; 
Number of earnings reports in ESF: Percent: 10.29%.

Range of earnings reports in the ESF: 10 - 99; 
Number of employers: Number: 712,992; 
Number of employers: Percent: 16.71%; 
Number of earnings reports in ESF: Number: 20,115,472; 
Number of earnings reports in ESF: Percent: 23.76%.

Range of earnings reports in the ESF: 100 - 999; 
Number of employers: Number: 109,728; 
Number of employers: Percent: 2.58%; 
Number of earnings reports in ESF: Number: 27,840,242; 
Number of earnings reports in ESF: Percent: 32.91%.

Range of earnings reports in the ESF: 1,000 - 4,999; 
Number of employers: Number: 7,800; 
Number of employers: Percent: 0.19%; 
Number of earnings reports in ESF: Number: 14,881,480; 
Number of earnings reports in ESF: Percent: 17.59%.

Range of earnings reports in the ESF: 5,000 - 9,999; 
Number of employers: Number: 721; 
Number of employers: Percent: 0.01%; 
Number of earnings reports in ESF: Number: 4,912,715; 
Number of earnings reports in ESF: Percent: 5.80%.

Range of earnings reports in the ESF: 10,000 - 49,999; 
Number of employers: Number: 348; 
Number of employers: Percent: 0.01%; 
Number of earnings reports in ESF: Number: 6,209,815; 
Number of earnings reports in ESF: Percent: 7.34%.

Range of earnings reports in the ESF: 50,000 - 99,999; 
Number of employers: Number: 12; 
Number of employers: Percent: 0.00%; 
Number of earnings reports in ESF: Number: 796,613; 
Number of earnings reports in ESF: Percent: 0.95%.

Range of earnings reports in the ESF: 100,000 - 299,999; 
Number of employers: Number: 9; 
Number of employers: Percent: 0.00%; 
Number of earnings reports in ESF: Number: 1,154,070; 
Number of earnings reports in ESF: Percent: 1.36%.

Range of earnings reports in the ESF: Total; 
Number of employers: Number: 4,264,795; 
Number of employers: Percent: 100.0%; 
Number of earnings reports in ESF: Number: 84,614,100; 
Number of earnings reports in ESF: Percent: 100.0%.

Source: GAO analysis of ESF data.

Note: Data for the 8,890 employers with 1,000 or more reports in the 
ESF are highlighted.

[End of table]

One measure of employer reporting problems is to identify those that, 
year after year, submit reports that are posted to the ESF. For 
example, relatively few employers--about 24,000--had a report in each 
of the 16 years, accounting for a total of 14.6 million reports. 
Although those 24,000 employers represented only 0.5 percent of all 
employers, they had submitted about 17 percent of the total number of 
reports. In addition, we 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. 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.

Finally, certain types of businesses appear to be disproportionately 
associated with earnings reports in the ESF. We obtained data from SSA 
that described the types of businesses for 1.8 of the 4.3 million 
employers with earnings reports in the ESF for the period examined. 
Figure 2 shows that of the 83 total broad industry categories, 5 of the 
categories alone accounted for 43 percent of these reports: eating and 
drinking establishments, construction and special trades, agricultural 
production-crops, business service organizations, and health service 
organizations. Our analysis of industry types may not be representative 
of all 4.3 million employers with reports in the ESF, because 
information on the industry categories for other 2.5 million employers 
was not available. However, it is consistent with an analysis reported 
by SSA's OIG. In September 1999, the OIG examined earnings reports from 
100 employers with the most suspended wage items.[Footnote 7] OIG 
reported that 67 percent of these employers were in industries that it 
categorized as services, restaurants, and agriculture. It also noted 
that SSA's experience is that employers who rely on a workforce 
consisting of relatively unskilled or migrant workers are the major 
source of suspended earnings reports.

Figure 2: Employers Reporting Earnings in the ESF, by Type of Business:

[See PDF for image]

Note: The total is based on 1.8 million employers with reported 
industrial codes.

[End of figure]

Earnings from Frequently Used SSNs Are Often Reinstated and 
Increasingly Belong to Foreign-Born Workers:

SSA successfully reinstates a substantial number of earnings reports 
associated with frequently used SSNs in the ESF. Overall, the majority 
of reinstated earnings we examined were posted to the Social Security 
records of U.S.-born workers. In recent years, however, the number of 
foreign-born workers receiving reinstatements from these SSNs has 
significantly grown. Further, our analysis of data indicates that the 
reinstated earnings for foreign-born workers may often relate to 
unauthorized employment.

To obtain information about reinstatements made to repeatedly used 
SSNs, we analyzed the 295 SSNs that appeared most frequently in the ESF 
for tax years 1985-2000. Each of these SSNs had 1,000 or more earnings 
records posted to them for these 16 tax years. Of the reports 
associated with these SSNs since 1937, SSA reinstated 13.1 million to 
the records of about 11.7 million individuals. Overall, the 295 SSNs 
have about 9.58 million reports for which the actual worker is still 
unidentified, representing about $14.5 billion in unposted earnings. Of 
these 9.58 million reports that remain in the ESF, about 8.9 million 
are under the all-zero SSN (000-00-0000). The average unposted earnings 
associated with the 9.58 million reports were about $1,513. However, 
the range was wide. Table 7 shows that almost 25 percent of the reports 
had unposted earnings of $100 or less, and about 3 percent of the 
reports had unposted earnings over $10,000. About 84 percent of the 
reports had earnings of $2,000 or less.

Table 7: Ranges of Unposted Earnings Associated with the 9.58 Million 
Items in the ESF under the 295 SSNs Analyzed:

Range of unposted earnings amounts: $100 or less; 
Number of reports: 2,270,019; 
Percentage of reports: 23.7%.

Range of unposted earnings amounts: $100.01-$830; 
Number of reports: 4,371,563; 
Percentage of reports: 45.6%.

Range of unposted earnings amounts: $830.01-$2,000; 
Number of reports: 1,400,315; 
Percentage of reports: 14.6%.

Range of unposted earnings amounts: $2,000.01-$5,000; 
Number of reports: 887,083; 
Percentage of reports: 9.3%.

Range of unposted earnings amounts: $5,000.01-$10,000; 
Number of reports: 376,258; 
Percentage of reports: 3.9%.

Range of unposted earnings amounts: $10,000.01-$20,000; 
Number of reports: 198,250; 
Percentage of reports: 2.1%.

Range of unposted earnings amounts: $20,000.01-$30,000; 
Number of reports: 42,557; 
Percentage of reports: 0.4%.

Range of unposted earnings amounts: $30,000.01-$50,000; 
Number of reports: 20,590; 
Percentage of reports: 0.2%.

Range of unposted earnings amounts: Over $50,000; 
Number of reports: 10,292; 
Percentage of reports: 0.1%.

Total; 
Number of reports: 9,576,927; 
Percentage of reports: 99.9%[A].

Source: GAO analysis of SSA ESF for tax years 1985-2000.

[A] The column does not sum to 100 percent because of rounding.

[End of table]

Since 1937, SSA has made 13.1 million reinstatements of earnings from 
the 295 SSNs to 11.7 million different persons. SSA maintains limited 
data on the characteristics of persons who receive reinstatements. 
However, the data did allow us to document an individual worker's 
gender, birth date, and country of birth, as well as when his or her 
SSN was issued. Overall, about 59 percent of these recipients were 
male. About 10.5 million, or 90 percent, of all persons receiving the 
reinstatements were born in the United States. Males represented about 
59 percent of the U.S.-born population also. For those who are still 
living (10 million), the median age of U.S.-born persons with 
reinstatements was 49 years old. The remaining 1.2 million persons were 
born in other countries, with Mexico being the predominant country of 
birth (about 26 percent of all foreign-born). About 62 percent of the 
reinstatements to foreign-born workers went to men. The median age of 
the foreign-born recipients of reinstated earnings who were still 
living was 53 years old.

The data show that U.S.-born workers are the primary recipients of 
reinstatements associated with the 295 SSNs we analyzed. However, when 
we examined reinstatement activity in later years, the percentage of 
foreign-born persons receiving such reinstatements has grown over time. 
For example, table 8 shows that in 1989 foreign-born recipients more 
than doubled from about 8 percent before 1986 and in 2003 grew to 
nearly 21 percent. This percentage is higher than the estimated 14 
percent of foreign-born workers currently in the U.S. labor 
force.[Footnote 8] Our analysis also shows foreign-born recipients of 
recent reinstatements from the 295 SSNs we analyzed are predominantly 
male--about 65 percent.

Table 8: Percentage of Reinstatement Recipients Reviewed Who Were 
Foreign-Born, by Year:

Year: 1937-85; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
7.85%.

Year: 1986; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
10.63%.

Year: 1987; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
12.11%.

Year: 1988; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
13.87%.

Year: 1989; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
16.69%.

Year: 1990; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
18.43%.

Year: 1991; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
16.79%.

Year: 1992; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
19.17%.

Year: 1993; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
15.18%.

Year: 1994; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
23.15%.

Year: 1995; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
17.15%.

Year: 1996; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
19.39%.

Year: 1997; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
13.46%.

Year: 1998; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
17.36%.

Year: 1999; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
18.23%.

Year: 2000; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
16.94%.

Year: 2001; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
14.47%.

Year: 2002; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
18.12%.

Year: 2003; 
Percentage of reinstatement recipients reviewed who were foreign-born: 
20.72%.

Source: GAO analysis of SSA data.

[End of table]

The top four countries of birth for workers who received reinstatements 
were Mexico, Canada, Germany, and Cuba. Workers from these four 
countries represented nearly 40 percent of all foreign-born individuals 
receiving reinstatements from the SSNs we analyzed. Table 9 shows the 
top 10 countries of birth for the foreign-born persons with 
reinstatements we analyzed.

Table 9: Analysis of Foreign-Born Persons Receiving Reinstatements from 
Repeatedly Used SSNs, Grouped by Countries of Birth:

Country of birth: Mexico; 
Number: 293,973; 
Percent: 25.58%.

Country of birth: Canada; 
Number: 55,452; 
Percent: 4.82%.

Country of birth: Germany; 
Number: 54,005; 
Percent: 4.70%.

Country of birth: Cuba; 
Number: 52,284; 
Percent: 4.55%.

Country of birth: United Kingdom; 
Number: 43,714; 
Percent: 3.80%.

Country of birth: The Philippines; 
Number: 43,390; 
Percent: 3.78%.

Country of birth: Italy; 
Number: 39,750; 
Percent: 3.46%.

Country of birth: Japan; 
Number: 30,144; 
Percent: 2.62%.

Country of birth: South Korea; 
Number: 26,800; 
Percent: 2.33%.

Country of birth: Dominican Republic; 
Number: 22,233; 
Percent: 1.93%.

Country of birth: All other countries; 
Number: 487,581; 
Percent: 42.42%.

Country of birth: Total; 
Number: 1,149,326; 
Percent: 100.00%.

Source: GAO analysis of SSA data.

[End of table]

In addition to the growth in the percentage of foreign-born persons 
receiving reinstatements, the extent of probable unauthorized work 
related to such reinstatements has been growing.[Footnote 9] In order 
for a person to legally work in the United States, he or she must have 
a valid SSN. Thus, any earnings reports filed for a tax year before a 
worker's valid SSN was actually issued by SSA are potential indicators 
of unauthorized employment. Data we analyzed show that historically 
about 7 percent of foreign-born workers with reinstatements from 
repeatedly used SSNs had earnings prior to SSN issuance.[Footnote 10] 
However, when we examined reinstatement activity associated with more 
recent work years and earnings, the percentage of reinstatements to 
foreign-born persons with work activity prior to SSN issuance is 
significantly higher--an average of about 32 percent of such 
reinstatements occurring between 1986-2003. (See table 10). Further, in 
some years, these reinstatements for potentially unauthorized work have 
been in excess of 50 percent of all reinstatements to foreign-born 
recipients.

Table 10: Percentage of Reinstatements to Foreign-Born Persons with 
Earnings before Receipt of SSN, by Year of Earnings:

Year of earnings: 1937-85; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 6.55%.

Year of earnings: 1986; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 13.86%.

Year of earnings: 1987; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 14.61%.

Year of earnings: 1988; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 34.61%.

Year of earnings: 1989; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 49.00%.

Year of earnings: 1990; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 55.53%.

Year of earnings: 1991; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 40.52%.

Year of earnings: 1992; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 54.52%.

Year of earnings: 1993; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 48.94%.

Year of earnings: 1994; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 62.03%.

Year of earnings: 1995; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 54.56%.

Year of earnings: 1996; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 50.56%.

Year of earnings: 1997; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 49.83%.

Year of earnings: 1998; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 55.86%.

Year of earnings: 1999; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 52.44%.

Year of earnings: 2000; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 61.23%.

Year of earnings: 2001; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 56.09%.

Year of earnings: 2002; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 48.35%.

Year of earnings: 2003; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 47.03%.

Year of earnings: Average over last 18 years; 
Percentage of reinstatements to foreign-born persons with earnings 
before receipt of SSN: 31.90%.

Source: GAO analysis of SSA data.

[End of table]

Several Key Factors Contribute to ESF Postings:

Current employer requirements for obtaining and reporting worker 
identity information create an environment in which inaccurate or false 
names and SSNs can be used for employment purposes, leading to 
difficulties associating reported earnings with the correct Social 
Security record. In addition, even though IRS can penalize employers 
for failing to file complete and correct information on Form W-2 and 
DHS can examine and penalize problem employers' hiring practices, 
enforcement efforts have been limited and may facilitate careless 
reporting. Finally, although employers have access to several systems 
to verify worker names, SSNs, and work authorization status, these 
systems have limitations and are underutilized.

Current Requirements for Gathering and Reporting Worker Identity 
Information Are Limited:

Both the IRS and DHS have requirements that employers must follow when 
gathering or reporting key information supplied by newly hired workers. 
IRS requires workers to complete an IRS Form W-4, which identifies 
workers for tax withholding purposes, and DHS requires workers and 
employers to complete a DHS Form I-9 (Employment Eligibility 
Verification Form) for identity and work authorization. IRS regulations 
permit employers to use information on the I-9 to identify workers. 
However, these requirements are limited and do not provide reasonable 
assurance that workers' names, SSNs, or work eligibility status will be 
accurately obtained and that earnings associated with these workers 
will be properly credited to valid Social Security records.

Under IRS regulations, employers rely primarily upon newly hired 
workers to self-report information, such as their name and SSN, and are 
not required to corroborate this information. This process involves new 
workers filling out Form W-4, which includes the worker's name, SSN, 
address, tax filing status (single or married), and number of tax 
exemptions claimed.[Footnote 11] While workers must report their names 
and SSNs to employers, under current IRS regulations, they do not have 
to present their Social Security card for inspection when they are 
hired.[Footnote 12] Also, the law does not require employers to 
independently corroborate the worker's name and SSN information with 
SSA. Workers that do not have an SSN, however, must submit evidence 
that they have applied for one, such as a letter from SSA. As currently 
implemented, IRS's limited requirements provide few safeguards to 
ensure that employers solicit and report accurate worker information. 
If examined by IRS, employers must simply show that they requested 
worker name and SSN information. Employers do not have to show that 
they attempted to corroborate this information with SSA. Lack of 
verification reduces the opportunity to detect worker misuse of SSNs 
and identity information and, ultimately, lead to earnings reports 
being placed in the ESF and possibly underpaid Social Security 
benefits. As our analysis shows, millions of reports that SSA receives 
each year from employers contain incomplete or incorrect information 
and cannot be posted to valid Social Security records.

DHS also requires employers to solicit key information from workers to 
prevent unauthorized employment. The 1986 Immigration Reform and 
Control Act (IRCA)[Footnote 13] requires employers to verify the 
identity and work eligibility status of individuals hired after 
November 6, 1986, and prohibits employers from knowingly hiring or 
continuing to employ persons who are unauthorized to work in the United 
States. Form I-9 was created to obtain information from new workers so 
that their employers could verify the workers' eligibility for 
employment, so as to preclude the hiring of individuals not authorized 
to work in the United States. In the section of the Form I-9 that newly 
hired workers must complete, the form asks new workers to list their 
name, address, and SSN. (According to DHS, providing the SSN is 
actually optional for workers). Such workers also must provide 
employers with specific documents as proof of identity and work 
authorization.[Footnote 14] These include state driver's licenses to 
establish identity, Social Security cards and birth certificates to 
establish work authorization, and various types of immigration 
documents to establish a person's identity and work status. If a 
furnished document appears to be genuine and appears to relate to the 
person presenting it, the employer must accept the document and record 
what was actually reviewed. Employers must also maintain a Form I-9 on 
file for 3 years from the date of hire or 1 year from the date of 
termination, whichever is longer.

While the IRCA requirement is more demanding than IRS's regulations, 
employers still rely primarily on visually examining numerous types of 
documents with no independent corroboration with the issuing agencies. 
Fraudulent identity and work authorization documents are widely 
available, can be of high quality, and are difficult to detect by 
employers who are not document experts. In prior work, we testified 
that DHS employer sanction data indicated that, between October 1996 
and May 1998, about 50,000 unauthorized aliens had used 78,000 
fraudulent documents to obtain employment.[Footnote 15] In June 2002, 
we again testified that hundreds of thousands of unauthorized workers 
have used fraudulent documents to circumvent processes designed to 
prevent their hire.[Footnote 16] Such documents would likely be 
associated with erroneous earnings reports later filed by employers and 
recorded in the ESF.

Minimal IRS and DHS Enforcement Efforts May Foster Erroneous Reporting:

Both IRS and DHS have authority to impose penalties on employers who 
fail to follow their regulations for obtaining and reporting key 
information for newly hired workers. However, IRS's requirements are so 
limited that employers are unlikely to be penalized. While DHS has a 
worksite enforcement program to address unauthorized employment, its 
resources devoted to such activities have been minimal in recent years. 
Thus, those employers who do not want to prepare accurate report 
information have little incentive to do so and failure to prepare 
accurate reports can contribute to ESF postings.

IRS has authority to assess penalties against employers who submit 
incomplete and inaccurate information on worker's W-2s, including SSNs. 
However, IRS may waive such penalties if reporting problems are due to 
"reasonable cause." For example, employers may demonstrate that a 
reporting error was due to events beyond their control--such as the 
worker provided false identity or SSN information. Employers must also 
demonstrate that they acted responsibly to avoid errors and correct 
them promptly. When employers are notified by IRS that a worker's 
reported SSN is incorrect, the employer must make up to two annual 
solicitations for the correct SSN. If the worker does not comply with 
the requests, IRS requires no further actions. The reasonable cause 
standard, however, does not apply if an employer acts with "intentional 
disregard." Intentional disregard applies, for example, when an 
employer knows or should know W-2 reporting requirements but 
demonstrates a pattern of ignoring them.

We recently reported that IRS's regulations for obtaining and verifying 
worker names and SSNs are so minimal that it is unlikely IRS would ever 
penalize employers.[Footnote 17] IRS's own analysis bears this point 
out. In 2003, IRS reported on a review of 78 employers it defined as 
egregious filers of earnings reports: those who filed either a high 
number or a high percentage of their reports with incorrect worker 
names and SSNs. The report that was prepared covered 50 (large and mid- 
sized businesses) of the 78 businesses IRS reviewed.[Footnote 18] IRS's 
evaluation concluded that all of the employers had met the reasonable 
cause standard because events beyond their control had caused the 
errors. That is, the workers had provided employers with incorrect 
information. IRS also concluded that the employers acted responsibly 
under current regulations because they solicited names and SSNs from 
workers and obtained signed W-4s or I-9s. We are concerned, however, 
that although the employers met IRS's technical requirements for 
soliciting names and SSNs in these cases, there was no assurance that 
the information was accurate because they relied exclusively on worker- 
supplied information, with no independent corroboration with SSA or any 
other public or private data source. Thus, workers using fraudulent 
SSNs as identity information would go undetected.

The IRS report detailed specific actions that could improve the 
accuracy of earnings reports, such as requiring employers to review the 
Social Security card for prospective new workers and verify the SSN 
with SSA. In discussing this issue, IRS officials expressed concern 
that requiring the verification of names and SSNs may cause some 
employers to cease withholding taxes and reporting income from 
unauthorized workers, rather than risk losing such workers. Further, 
increased compliance would likely come at the expense of other 
compliance activities. The net effect of such a response would be a 
decrease in tax collections and compliance. IRS also expressed concern 
that worker verification systems do not always supply timely responses 
and that mandating such a system could pose an undue administrative 
burden on employers. Nevertheless, IRS agreed with our August 2004 
report recommendation that it analyze options and consider how best to 
increase the accuracy of employer reporting. Such an effort would 
include re-examining its reasonable cause standard and penalty process.

DHS has primary responsibility for ensuring that employers verify the 
identity and work authorization status of newly hired workers, as 
required by IRCA and the Illegal Immigration Reform and Immigrant 
Responsibility Act (IIRIRA) of 1996.[Footnote 19] Under IRCA, employers 
are prohibited from hiring or continuing to employ a person not 
authorized to work in the United States, provided that the employer 
knows that the person is not authorized to work or has lost such 
authorization. Employers are also prohibited from hiring an individual 
for employment in the United States without verifying his or her 
employment eligibility via the Form I-9. A violation of either of these 
prohibited practices can subject an employer to civil monetary 
penalties. Employers engaging in a pattern or practice of knowingly 
hiring or continuing to employ unauthorized workers can be subject to 
fines and imprisonment.[Footnote 20] However, over time, DHS has 
devoted limited and decreasing resources to general worksite 
enforcement. For example, the number of employer investigations and 
intent to fine notices have dropped substantially (see fig. 3). The 
number of work years devoted to worksite enforcement has also 
dramatically declined in the past 5 years, from 278 in 1999 to 105 in 
2003, a decrease of 62 percent (see fig. 4).

Figure 3: Employer Investigations and Notices of Intent to Fine Letters 
Issued, Fiscal Years 1992 to 2002:

[See PDF for image]

[End of figure]

Figure 4: Investigative Work Years and Arrests of Unauthorized Workers, 
Fiscal Years 1999 to 2003:

[See PDF for image]

[End of figure]

DHS officials noted several reasons for these declines, including a 
change in its enforcement strategy around 1999 because of limited 
resources to arrest and detain millions of unauthorized workers. Fining 
employers also came to be viewed as ineffective by DHS because the 
process could take more than a year. DHS began to place more emphasis 
on cooperative efforts such as auditing employer Form I-9s to identify 
unauthorized workers and conducting seminars on fraudulent documents 
and worker verification services. DHS also told us that the events of 
September 11, 2001 caused a substantial redirection of worksite 
enforcement activity toward unauthorized workers in critical 
infrastructure facilities, such as airports, power plants, and military 
bases.

DHS coordination with SSA to identify persons who do not have work 
authorization has been limited, despite a 1996 law requiring such 
activity. Section 414 of IIRIRA requires SSA to provide DHS with an 
annual listing of persons who have earnings but do not have SSNs 
authorizing them to work. For years, SSA has provided DHS with annual 
data on about 575,000 such persons. The data include annual earnings 
amounts, worker names and addresses, and employer names and addresses 
as well. However, DHS reported that it has made little use of this 
information in its worksite enforcement efforts. In explaining why, DHS 
officials noted that the data came from SSA in an electronic format 
that was incompatible with their systems. They also noted that DHS 
records do not usually contain SSNs for aliens[Footnote 21] and SSA's 
records do not contain the DHS identification number assigned to 
aliens, so it is difficult to match SSA's listing to DHS's records. In 
order to facilitate the use of the data, in 2004, DHS and SSA agreed on 
a new format that SSA is to use to report data to DHS. Also, DHS told 
us that it has recently begun to use a contractor to make the SSA data 
more usable and available for possible enforcement actions. While 
Congress developed this IIRIRA provision for reasons other than 
reducing ESF earnings postings, some additional level of DHS activity 
in this area might provide a deterrent against individuals who use 
invalid or false SSNs that contribute to ESF earnings reports.

Voluntary Employee Verification Services Have Some Limitations and Are 
Underutilized:

Employers do not widely use worker verification services offered by 
both SSA and DHS. These services provide a valuable opportunity to 
prevent many unintended or careless mistakes when hiring new workers 
and reporting worker earnings.[Footnote 22] However, they have some 
limitations in detecting the misuse of another person's name and SSN, 
and they remain underutilized.

SSA began offering employers the ability to voluntarily verify the 
accuracy of worker-supplied SSNs and names to help them file more 
accurate annual earnings reports. SSA does not charge employers for 
this service, and over the years, it has developed several different 
verification methods to meet their needs. For example, employers may:

* Provide SSA with a magnetic tape or a diskette of their workers' 
names and SSNs. SSA will verify the names and SSNs for up to 250,000 
workers at a time. According to SSA, it takes about 30 days for SSA to 
respond, after it receives the request. SSA data show that about 6,000 
of the 6.5 million U.S. employers sent SSA over 53 million verification 
requests in 2003. For about 12 percent of the requests, SSA could not 
verify the worker's name and SSN.

* Call a toll-free 800 number to verify names and SSNs. SSA staff will 
immediately verify information for up to 5 workers at a time. In fiscal 
year 2003, SSA data show it received about 1.1 million calls from 
employers, but SSA does not track how many different employers used the 
service. SSA officials believe that a limited number of employers use 
the service. In fact, they believe that some larger employers with 
significant turnover have dedicated staff whose job is to call the 800 
number throughout the day to bypass the 5-worker per call verification 
limit. Thus, these employers would represent a disproportionate number 
of calls to the service.

* Provide a hard-copy listing of workers' names and SSNs that can be 
faxed, mailed, or hand-delivered to local Social Security offices. SSA 
staff verify information for a maximum of 50 workers at a time. 
Response times are subject to office workloads; SSA stated that, 
generally, such response takes 1 to 2 weeks to process, but may take 
longer. Our visits to 8 SSA field offices indicated that at these 
offices very few employers utilize this method of verification.

SSA verifies the information received from employers by comparing it 
with information in its own records. SSA then advises the employer 
which worker names and SSNs do not match. While the service is an 
important tool to improve reporting accuracy, the information SSA cross-
matches against varies depending upon the mode of verification 
employers select. For two of the methods (requests through the 800 
number or at local offices), employers must provide SSA with a worker's 
name, SSN, date of birth, and gender. In contrast, verifications for 
SSA's most predominant mode of verification--electronic batch 
processing, do not include a match against workers' date of birth and 
gender. Although employers do not have to submit dates of birth and 
gender, SSA will match against those two pieces of information if 
employers voluntarily submit them. By not requiring a match against 
dates of birth for this verification mode, SSA exposes itself to 
potential fraud and identity theft. In particular, persons using the 
name and SSN of persons much younger or older than themselves for 
employment purposes would remain undetected, despite the verification 
process. In discussing this limitation, SSA staff responsible for the 
verification services acknowledged that the requirements should be 
consistent, especially at a time when identity theft is a growing 
problem and homeland security is a major concern. However, as of 
November 2004, there was no initiative under way at SSA to address this 
inconsistency.

SSA's verification systems have other limitations. As previously noted, 
the response time varies among the different methods. Slow response 
times are a negative feature for businesses concerned about the 
competitive implications of using these systems. For example, some 
businesses fear that by using the service, they will give nonusing 
competitors an advantage in obtaining workers in a tight labor market. 
In an attempt to make verification more attractive to employers, SSA 
has been testing a Web-based system, which is designed to respond to 
employer requests within 24 hours.[Footnote 23] Requests of up to 10 
worker names and SSNs will be instantaneous. SSA expects that this 
verification method will become available in 2005.

DHS also operates a pilot program for employment eligibility 
confirmation in conjunction with SSA. To reduce employment of 
unauthorized alien workers, Congress required (in IIRIRA of 1996) that 
DHS develop and test three pilot programs to assist employers in 
verifying workers' identity and work eligibility status.[Footnote 24] 
Accordingly, the Basic Pilot Program was developed and made available 
to employers in six states starting in 1997. The Basic Pilot requires 
participating employers to electronically verify the status of all 
newly hired workers within 3 days of hire. Verification requests are 
routed electronically to SSA to check the validity of the SSN, name, 
and date of birth provided by the worker and whether SSA has 
information indicating that the worker is a citizen or a noncitizen 
with permanent work authorization. If the submitted information matches 
SSA's records, SSA immediately transmits an employment authorization 
response via DHS to the employer. If SSA is unable to verify the SSN, 
name, date of birth, or work eligibility status, a tentative 
nonconfirmation response is transmitted to the employer. The employer 
must notify the worker of the tentative nonconfirmation and check the 
accuracy of the information originally submitted. If the employer finds 
errors in either the Form I-9 that was completed or the data entered 
into the Basic Pilot system, the employer should resubmit the 
verification request with corrected data. If no such errors are found, 
however, the employer must advise the worker to visit an SSA field 
office within 8 federal workdays from the date of the response to 
resolve any discrepancies in his or her SSA record.

If SSA is able to verify the SSN, name, and date of birth of a newly 
hired noncitizen, but is unable to verify the work eligibility status, 
it electronically refers the query to DHS, for a check against DHS's 
automated records. If DHS confirms that the person is work authorized, 
the employer is immediately notified. If DHS cannot verify work 
authorization status for the submitted name and SSN, the query is 
referred to DHS field office "status verifiers" for additional 
research. According to DHS, responses for queries referred to the 
status verifiers generally occur within 24 hours. When the record 
searches cannot verify work authorization, DHS sends a tentative 
nonconfirmation response to the employer. If workers wish to contest 
such a response from DHS, they must call a toll-free telephone number 
provided by DHS within 8 federal workdays from the date of the response 
to resolve any discrepancies in their DHS record. If employment 
authorization cannot be verified, employers may terminate employment.

A 2002 study of the Basic Pilot found that work authorization for 
queried workers was never resolved in about 13 percent of queried 
cases.[Footnote 25] In most of these cases, the workers never contested 
the tentative nonconfirmation response. However, like SSA's 
verification service, the Basic Pilot has not been widely utilized. As 
of June 2004, about 2,500 of 2.1 million eligible businesses operating 
in the pilot states have actually registered to participate. Those 
participants made about 365,000 initial verification requests over a 2- 
year test period. The study also identified some problems with the 
pilot, such as erroneous nonconfirmation rates and program software 
that was not user friendly. In July 2004, DHS reported on actions being 
taken to address these weaknesses. These actions included improving 
federal data base accuracy to expedite data entry on persons entering 
the country as well as updating changes in immigrant work authorization 
status, switching to a Web-based verification system, providing better 
training for employers, and monitoring participating businesses.

In 2003, Congress required DHS to expand the verification service to 
all 50 states by December 2004.[Footnote 26] The Basic Pilot Program 
became available to employers in all 50 states on December 20, 2004. 
Furthermore, to improve its effectiveness and increase participation, 
DHS recently converted the program to a Web-based system, which became 
available on July 6, 2004. While DHS staff recognize its potential 
value in identifying unauthorized workers, they noted that by law, 
employers cannot be charged for this service and that the agency lacks 
sufficient funds to operate a system that would be used extensively. 
DHS officials did not have operational cost data for the verification 
service. However, in June 2002, contractors that studied the program 
for DHS estimated that federal costs to make verification of work 
eligibility and identity mandatory would be about $159 million annually.

Conclusions:

Despite the various tools used by SSA to aid in the proper crediting of 
worker earnings, the number of earnings reports in the ESF is 
substantial. Having effective policies and processes for verifying key 
SSN, identity, and work authorization information for the nation's 
workforce is critical to SSA, which is tasked with accurately paying 
retirement, survivors, and disability benefits. Sound verification 
processes are also critical to the administration of tax and 
immigration laws. However, at present, employers have few requirements 
to accurately identify their workers and file accurate and complete 
earnings reports. In fact, millions of earnings reports are submitted 
each year with erroneous or missing SSN and name information, and the 
same employers often file substantial numbers of such reports year 
after year, creating administrative problems for SSA and IRS and the 
possibility that Social Security benefits to such workers will not be 
accurately calculated.

Under current IRS reporting requirements, employers who chronically and 
willfully file inaccurate earnings information will likely never be 
deemed noncompliant or penalized. We acknowledge IRS's concern that 
more stringent employer reporting and verification requirements could 
have tax compliance implications and pose additional administrative 
burdens on the many employers who are already attempting to fulfill 
their reporting obligations. Although IRS's regulations meet statutory 
requirements, we are concerned that its current requirements are so 
minimal that even the employers with a long standing history of 
chronically filing reports with critical errors are never sanctioned. 
In accordance with our prior recommendation, IRS is currently examining 
options for strengthening employer requirements for soliciting and 
verifying worker names and SSNs and developing a formal penalty 
program. As this effort progresses, SSA's ESF data could be valuable to 
IRS in developing criteria as to what employer reporting patterns and 
activities constitute "intentional disregard" and improve IRS's ability 
to target and penalize problem employers.

At present, it is also unlikely that DHS will take enforcement action 
against employers and workers who submit inaccurate information to SSA 
to conceal unauthorized work activity. We recognize that in the post- 
September 11 environment, DHS enforcement resources have been needed in 
critical infrastructure industries and that data-sharing initiatives 
with SSA have thus received less priority in recent years. However, it 
is important that some level of coordination be reestablished to best 
leverage SSA's data on potential unauthorized work activity and DHS 
staff resources to target the most egregious employers.

Finally, any effort to verify worker-supplied identification and work 
authorization information warrants a thorough and accurate process. SSA 
currently offers several options for employers who choose to verify 
worker-provided information and has continually sought to upgrade its 
services. However, for the predominant mode of verification--electronic 
batch file--employers are not required to submit employee dates of 
birth for verification against SSA's records. Thus, persons using the 
names and SSNs of persons much older or younger than themselves to seek 
employment would not be detected under current processes. This 
represents a critical flaw in SSA's service. DHS's Basic Pilot Program 
offers another option for addressing an important element affecting ESF 
postings--individuals who are not authorized to work in the United 
States. However, DHS officials believe they will likely experience 
capacity problems in the future if significantly more employers begin 
using the service, in part because of the number of cases requiring 
manual intervention to verify employment status. Accordingly, it is 
crucial that any deliberations pertaining to strengthening employer 
verification requirements include an informed discussion among the 
affected federal agencies as to the systems requirements and safeguards 
necessary to ensure the integrity, timeliness, and efficiency of the 
verification service.

Recommendations:

To better ensure that workers are accurately identified on Form W-2s 
necessary for the efficient administration of Social Security and tax 
laws, we recommend that the Commissioner of the Internal Revenue 
Service:

* Coordinate its ongoing effort to reassess employer requirements for 
soliciting and verifying worker names and SSNs with SSA. This could 
include utilizing SSA's ESF data to identify employer reporting 
patterns and activities that could constitute intentional disregard and 
using such data to develop criteria to better target and penalize only 
those employers who chronically submit inaccurate earnings reports or 
requiring such employers to verify worker identity information with SSA.

* Ensure the development of any new reasonable cause requirements 
occurs in consultation with SSA and DHS, which operate employee 
verification services. Such consultation could facilitate systems 
improvements to ensure the integrity, timeliness, and efficiency of 
existing verification services.

We recommend that the Commissioner of the Social Security 
Administration:

* require employers seeking verifications, via SSA's electronic batch 
process, to submit the workers' dates of birth, for matching against 
SSA's records.

We recommend that the Secretary of the Department of Homeland Security:

* take steps to determine how DHS can best use SSA-supplied data on 
potential illegal work activity and specific industries associated most 
frequently with such activity to support its worksite enforcement 
efforts.

Agency Comments and Our Evaluation:

We obtained written comments on a draft of this report from the 
Commissioners of SSA and IRS and the Department of Homeland Security. 
The comments have been reproduced in appendixes II, III and IV. Each 
agency also provided additional technical comments, which have been 
incorporated in the report as appropriate.

SSA noted that it is continuing to assist the employer community in 
verifying worker information and welcomed the opportunity to work with 
IRS and DHS to improve verification operations. The agency also 
reiterated its commitment to continued outreach to employers and other 
federal agencies, as well as to facilitate accurate reporting via its 
Employer 800 number service and Employer Service Liaison Officers 
(ESLOs) located in each region. SSA agreed to investigate further our 
recommendation that it should require employers who use the electronic 
batch process to submit workers' dates of birth for matching against 
its records. However, SSA noted that such a requirement could create 
additional burdens for the employer community and workload increases 
for SSA staff responsible for investigating mismatches. We acknowledge 
SSA's concerns in this area. However, given the volume of verification 
requests processed through SSA's batch process each year, and the 
potential vulnerabilities associated with not matching against workers' 
dates of birth, we continue to believe prompt action is needed. 
Addressing our recommendation would also make SSA's batch verification 
process consistent with the agency's other modes of verification, 
whereby workers' dates of birth are a required element for matching 
against SSA's records.

In its comments, IRS acknowledged that employers' submission of 
earnings reports with inaccurate SSNs increases the quantity of 
suspense file postings, although it expressed the view that these 
mismatches stem from inaccurate or incomplete information provided by 
workers. The agency also noted that it is currently conducting 
compliance checks in coordination with SSA on those employers with the 
most egregious cases of reporting incomplete or inaccurate worker SSNs 
to SSA. Accordingly, IRS agreed with our recommendation that it work 
closely with SSA in its ongoing efforts to reassess current employer 
requirements for soliciting and verifying worker names and SSNs. IRS 
also concurred with our recommendation that the agency ensure that the 
development of any new reasonable cause requirements occurs in 
consultation with SSA and DHS, which operate worker verification 
services.

DHS noted that while its general worksite enforcement program has had 
decreasing resources recently, since September 11 DHS has refocused its 
enforcement activities on removing unauthorized workers employed in 
critical infrastructure facilities. Such enforcement activities have 
resulted in removing over 5,000 unauthorized workers who were employed 
in industry categories that have been the historical targets of 
traditional worksite enforcement operations--food service, janitorial, 
agriculture, and construction, among others, but employed in critical 
infrastructure facilities. Therefore, DHS contends that although there 
is a decrease in the number of criminal cases and civil fines, there is 
still a significant effort under way to remove unauthorized workers. 
DHS also explained that although it will take the necessary steps to 
determine the best use of the annual SSA-provided listing of persons 
with earnings who lack work authorization, there are various 
impediments to accomplishing this task. Regarding DHS's comments, we 
have summarized both the reasons for DHS's switch in enforcement 
priorities and the impediments to using the SSA-provided listing. We 
acknowledge DHS's current efforts to determine how it can best use the 
listing and we support cost effective ways by which the listing might 
identify illegal work activity and specific industries associated most 
frequently with such activity, to further worksite enforcement efforts.

As agreed with your offices, unless you publicly announce its contents 
earlier, we plan no further distribution of this report until 30 days 
after its issue date. At that time, we will send copies of this report 
to the Commissioner of the Social Security Administration, the 
Commissioner of the Internal Revenue Service, and the Secretary of the 
Department of Homeland Security, the Director of the Office of 
Management and Budget, appropriate congressional committees, and other 
interested parties. In addition, the report will be available at no 
charge on GAO's Web site at http://www.gao.gov/.

If you have any questions concerning this report, please contact me at 
(202) 512-7215 or Dan Bertoni at (202) 512-5988. Other major 
contributors are listed in appendix V.

Signed by: 

Barbara D. Bovbjerg: 
Director, Education, Workforce, and Income Security Issues:

[End of section]

Appendix I: Objectives, Scope, and Methodology:

To obtain information describing the various electronic processes that 
the Social Security Administration (SSA) uses to post earnings reports 
to worker records and resolve errors in reported worker names and 
Social Security Numbers (SSN), we reviewed numerous SSA Office of the 
Inspector General, GAO, and contractor reports on the Earnings Suspense 
File (ESF). We met with SSA officials who manage the earnings posting 
process and examined SSA's Program Operations Manual System to identify 
and document processes and procedures for posting earnings to and 
reinstating earnings from the ESF. We reviewed information from SSA 
that described the various validation routines it uses in attempting to 
find valid matches of names and SSNs for earnings reports that do not 
initially match its records. We obtained management data on the number 
of earnings reports that these routines either posted to its records or 
reinstated from the ESF. We also visited eight SSA field offices 
located in New York, New Jersey, Virginia, and California that 
processed significant numbers of earnings reinstatements in 2003 to 
discuss their reinstatement activities and document procedures for 
reviewing and validating evidence submitted by individuals seeking to 
have earnings reinstated from the ESF.

To determine the characteristics of earnings posted in the ESF, we 
obtained and analyzed an electronic copy of the ESF for tax years 1985 
to 2000. We selected these years because they covered (1) a substantial 
period of time and (2) postings to and reinstatements from the ESF that 
occurred after legislation enacted in 1986 granted amnesty to 
unauthorized immigrants. Further, during this period, SSA also enhanced 
its earnings records in a way that provided more detailed information 
about reinstated earnings. The earnings records that we examined 
covered only reports on current wages, including reports that were 
filed late. The ESF contained 84.6 million records that met our 
criteria at the time we obtained the file in January 2003; these 
records were submitted by a total of 4.3 million different employers. 
The file we obtained contained information reporting employer's 
identification number, the reported worker's name and SSN on the 
invalid earnings report, the amount of unposted earnings, and the tax 
year of the report. From SSA, we were able to obtain Standard 
Industrial Classification codes for 1.8 million of the employers who 
had earnings in the ESF to identify the types of employers who had 
filed the earnings reports that we analyzed. (Because of 
confidentiality requirements, we were unable to arrange for timely 
access to similar codes for about 2.5 million employers in the file 
from the Census Bureau, which controls this information).

To analyze the reinstatement of earnings reported under repeatedly used 
SSNs, we first examined the ESF to identify the frequency that each SSN 
appeared for tax years 1985 to 2000. On the basis of our examination, 
we selected SSNs that appeared most frequently in the ESF for our 
reinstatement analysis. Specifically, we selected 295 SSNs that had 
1,000 or more reports in the ESF for the tax years analyzed. Overall, 
the 295 SSNs had about 9.6 million earnings reports representing about 
$14.5 billion in unposted earnings still in the ESF at the time that we 
received a copy of the file. We then obtained a complete copy of SSA's 
earnings reinstatement file that contained over 142 million records 
across all SSNs that had received reinstatements to identify the 
reinstatements made from these 295 reported SSNs. By comparing the 295 
SSNs with data in the reinstatement file, we identified that over the 
years SSA had reinstated about 13.1 million earnings reports from these 
295 SSNs to 11.7 million individuals. For the 11.7 million individuals, 
we obtained selected information from SSA's Numident, Master Earnings 
File, and Master Beneficiary Records. This information allowed us to 
identify the valid Social Security record that received each reinstated 
earnings report and obtain demographic information about each valid 
record holder receiving the reinstatement, such as age, gender, date 
when the person's SSN was issued, and place of birth.

To identify factors that contribute to ESF postings, we examined 
provisions of law that authorize (1) penalties for employers who file 
earnings reports with inaccurate SSNs and hire workers who are not 
authorized to work in the United States and (2) the disclosure of 
information on persons with nonwork SSNs to the Department of Homeland 
Security (DHS). We met with Internal Revenue Service (IRS) and DHS 
officials and obtained available enforcement data on the use of these 
penalties. We did not, however, evaluate their specific enforcement 
efforts. We analyzed information about worker verification tools that 
SSA offers to assist employers to report their workers' earnings and 
DHS offers to identify their workers' eligibility status under 
immigration laws. We also reviewed a detailed contractor study covering 
DHS's implementation of the Basic Pilot Program. To assess the 
reliability of databases used, we reviewed reports provided by SSA and 
its Office of the Inspector General, which contained recent assessments 
of these databases. We also interviewed knowledgeable agency officials 
to further document the reliability of these databases. In addition, we 
checked the data for internal logic, consistency, and reasonableness. 
We determined that all the databases were sufficiently reliable for 
purposes of our review.

Our work was conducted between October 2002 and December 2004 in 
accordance with generally accepted government auditing standards.

[End of section]

Appendix II: Comments from the Social Security Administration:

SOCIAL SECURITY:

The Commissioner: 

January 14, 2005:

Ms. Barbara Bovbjerg:
Director, Education, Workforce and Income Security Issues: 
U.S. Government Accountability Office: 
Washington, D.C. 20548:

Dear Ms. Bovbjerg:

Thank you for the opportunity to review and comment on the draft 
report, "Social Security: Better Coordination Among Federal Agencies 
Could Reduce Unidentified Earnings Reports" (GAO-05-154).

Our response and technical comments to the draft report are enclosed. 
If your staff has questions about the comments, they may contact 
Candace Skurnik, Director, Audit Management and Liaison Staff, at (410) 
965-4636.

Sincerely,

Signed by: 

Jo Anne B. Barnhart:

Enclosure:

COMMENTS ON THE GOVERNMENT ACCOUNTABILITY OFFICE (GAO) DRAFT REPORT, 
"SOCIAL SECURITY: BETTER COORDINATION AMONG FEDERAL AGENCIES COULD 
REDUCE UNIDENTIFIED EARNINGS REPORTS" GAO-05-154:

We appreciate the opportunity to comment on the draft report. The 
Agency has, and continues to pursue, activities that would assist the 
employer community in verification of name/Social Security number (SSN) 
prior to reporting end of the year wage information. We have various 
publications and services available to the public such as the Employer 
Guide, Fact Sheets, Employer Verification Service (EVS) Booklet, Online 
FAQs and Electronic Newletters (W-2 News), along with having Employer 
Service Liaison Officers (ESLO) in each Region, and an Employer 800 
Number service to assist in providing accurate wage reporting 
information to the employer community. One of the many duties of the 
ESLOs in each Region is to contact employers within their regions who 
have a large number of items in the Earnings Suspense File (ESF) to 
assist them in correcting those items and to help avoid future name/SSN 
problems. We are also always evaluating the needs of the employer 
community in an effort to ensure we are able to provide them the 
necessary tools to report correct name/SSN information.

As noted in the "Highlights," we agree that the Social Security 
Administration (SSA), Internal Revenue Service (IRS) and the Department 
of Homeland Security (DHS) should work to facilitate more accurate 
earnings reporting by employers, enhance existing electronic 
verification systems, and institute effective data sharing practices to 
deter unauthorized work activity and ESF earnings postings. We welcome 
the opportunity to work with IRS and DHS to achieve common goals of 
improving verification operations.

We appreciate GAO recognizing that SSA successfully posts 90 percent of 
all employer-submitted earnings records to the Master Earnings File 
(MEF) each tax year (TY). SSA then uses more than 20 automated front- 
end validation routines, for the remaining 10 percent, to correct 
common reporting mistakes enabling SSA to post earnings information to 
an individual's record. These processes allow SSA to post an annual 
average of approximately 15 million earnings records to the MEF each 
tax year with only 4 percent going to the ESF for later operational 
back-end routines. As GAO notes, in TY 2001, SSA successfully 
reinstated an additional 600,000 earnings records, using back-end 
routines, from the ESF to the MEF, representing about $4 billion in 
reported earnings.

SSA is involved with outreach to the employer community and many other 
Federal agencies. For example, each year SSA and the IRS jointly 
sponsor the National Payroll Reporting Forum where Federal agencies and 
the business community meet to identify, discuss and resolve common 
wage and tax reporting issues. The Commissioner is a keynote speaker at 
this year's National Payroll Reporting Forum. Other participating 
agencies include: U.S. Citizenship and Immigration Services, the 
Department of Labor, and the Administration for Children and Families. 
The event is attended by employers, payroll professionals, wage and tax 
submitters and others interested in the latest changes for the upcoming 
wage and tax season, electronic filing, social security number 
verification, and more. SSA has held the forum since 1991, and last 
year's event was SSA's largest with over 400 attendees. Many attendees 
commented that "this is the best forum ever," which was reflected in 
the forum evaluations as 80 percent indicated that "the agenda met 
their expectations," and 83 percent said they "plan to attend next 
year."

Our response to the specific recommendation for SSA and technical 
comments are below.

Recommendation:

Require employers seeking verifications, via SSA's electronic batch 
process, to submit the workers' dates of birth, for matching against 
SSA's records.

Comment:

We agree to investigate this recommendation further to determine its 
impact on SSA's operation and the employer community.

The primary reason for completing these verifications is for more 
accurate wage reporting. The date of birth is not included on an 
employee's W-2 and, therefore, is not needed for wage reporting 
purposes. Currently, the date of birth field is available for the 
employers, optional input. Changing the date of birth field from 
optional to mandatory could have an impact and place a burden on the 
employer community by increasing the amount of incorrect name and SSN 
mismatches, as well as SSA's field offices to investigate the mismatch 
and correct the information in our system of records if. necessary. 
Programming changes will be needed to make the date of birth mandatory 
if the Agency decides to take this course of action and will need to be 
considered as part of the Agency's prioritization process. 

[End of section]

Appendix III: Comments from the Internal Revenue Service:

DEPARTMENT OF THE TREASURY: 
INTERNAL REVENUE SERVICE: 
WASHINGTON, D.C. 20224:

COMMISSIONER:

January 21, 2005:

Ms. Barbara D. Bovbjerg: 
Director, Education, Workforce, and Income Security Issues: 
United States Government Accountability Office: 
Washington, DC 20548:

Dear Ms. Bovbjerg:

Thank you for the opportunity to respond to your draft report titled, 
"Social Security: Better Coordination Among Federal Agencies Could 
Reduce Unidentified Earnings Reports", (GAO-05-154). We agree that 
invalid name/Social Security Number (SSN) combinations cause potential 
problems with regard to Social Security Administration's (SSA) Earnings 
Suspense File (ESF).

By statute, SSA, the Internal Revenue Service (IRS), and Department of 
Homeland Security (DHS) each fulfill separate roles within the Federal 
Government. SSA advances the economic security of United States 
citizens through retirement and disability programs. IRS administers 
and enforces the nation's revenue laws. DHS leads efforts to ensure the 
security of the United States homeland and its citizens, including 
protection of the nation's borders. Despite these separate roles, the 
three agencies interact with each other, as necessary, to fulfill their 
respective roles and as authorized by law.

Your report recommends that the IRS further coordinate its ongoing 
efforts to reassess employer requirements for soliciting and verifying 
worker names and SSNs with SSA, including utilizing SSA's ESF data. I 
agree with this recommendation. This information should be shared 
between the two agencies to the extent permissible by law. For tax 
administration purposes, employers must show they attempted to solicit 
correct numbers from employees upon notification by IRS that an 
identifying number is incorrect. However, there is no statutory 
authority requiring employers to corroborate this information with SSA 
or IRS.

In coordination with SSA, we are currently conducting compliance checks 
on those employers with the most egregious cases of reporting 
incomplete or inaccurate employee SSNs to SSA. Upon completion of these 
checks, we will analyze the results and formulate strategies to address 
the mismatch issues identified in the report. This should enable us to 
identify employers, employer reporting patterns and activities that 
could constitute an intentional disregard of the tax rules and 
regulations.

In your report, you state that limited enforcement may contribute to 
employers' reporting errors. The report also describes SSA's extensive 
efforts to match and reinstate unidentified earnings. These efforts 
demonstrate that unmatchable earnings are not usually due to employer 
errors. The IRS does penalize employers who do not solicit information 
or fail to use information received from employees. However, the 
problems that result in ESF postings do not appear to be errors in 
solicitation or reporting but rather stem from inaccurate or incomplete 
information provided by the employee.

When Forms W-2 contain invalid name/SSN combinations, IRS can impose a 
fine unless the employer qualifies for a "reasonable cause" waiver. The 
reasonable cause waiver prevents employers from being held as 
guarantors of the accuracy of information for which they serve as mere 
transmitter. To qualify for a waiver, an employer must show due 
diligence in attempting to solicit an accurate SSN and soliciting again 
upon learning that the SSN provided is inaccurate.

We also concur with your recommendation to coordinate with other 
potentially impacted agencies on possible changes to the reasonable 
cause requirements. Working with these agencies at the outset will 
enable us to design and implement changes to the penalty structure 
without impeding their respective missions. As previously stated, we 
have worked with SSA to identify the most egregious filers of W-2s with 
mismatched identification numbers and we are conducting compliance 
checks on these employers. Any changes to the current system which 
might potentially lead to more accurate information reporting may also 
have a negative effect, particularly on tax administration. They must, 
therefore, be very carefully considered.

If you have any questions, please contact me or Steve Burgess, 
Director, Examination, Small Business/Self-Employed Division, at (202) 
283-2170.

Sincerely,

Signed for: 

Mark W. Everson: 

[End of section]

Appendix IV: Comments from the Department of Homeland Security:

U.S. Department of Homeland Security: 
Washington, DC 20528:

January 26, 2005:

Ms. Barbara Bovbjerg:
Director, Education, Workforce, and Income Security Issues:
U.S. Government Accountability Office: 
Washington, DC 20548:

Re: Draft Report GAO-05-154: SOCIAL SECURITY: Better Coordination Among 
Federal Agencies Could Reduce Unidentified Earnings Reports (GAO Job 
Code 130193):

Dear Ms. Bovbjerg:

Thank you for the opportunity to review and comment on the subject 
draft report. We are providing general comments for your use in 
preparing the final report and have submitted technical comments under 
separate cover.

On pages 23 and 25 of the report, respectively, the Government 
Accountability Office (GAO) opines: "While DHS has a worksite 
enforcement program to address unauthorized employment, its resources 
devoted to such activities have been minimal in recent years" and, 
"However, over time, DHS has devoted limited and decreasing resources 
to general worksite enforcement."

We wish to point out, however, that post-September 11, 2001, there has 
been ongoing progress in worksite enforcement efforts. U.S. Immigration 
and Customs Enforcement (ICE) worksite enforcement activities have 
focused on removing (through arrest or termination of employment) 
unauthorized workers employed in critical infrastructure facilities 
such as airports, military bases, nuclear power generation plants, 
seaports, etc. These Critical Infrastructure Protection (CIP) 
operations are generally cooperative endeavors with employers and 
security officials, and are not generally predicated on suspected 
employer violations. Since September 11, 2001, CIP operations have 
resulted in the identification and removal of over 5,000 unauthorized 
workers. These workers, although employed at infrastructure sites, were 
in occupational groups and industries that have been the historical 
targets of traditional worksite enforcement operations-food service, 
janitorial, agriculture, construction, etc. These operations, while 
classified as CIP, still resulted in the removal of unauthorized 
workers. The difference is they are normally done in conjunction with, 
and often at the request of, the governmental entities controlling 
security at critical installations. Therefore, although there is a 
decrease in the number of criminal cases and civil fines, there is 
still a significant effort underway to remove unauthorized workers.

With respect to recommendations, GAO has proposed that the Department 
of Homeland Security (DHS) take steps to determine how to best use 
Social Security Administration (SSA) supplied data on potential illegal 
work activity and specific industries associated most frequently with 
such activity to support its worksite enforcement efforts. The 
recommendation and the actions planned or being taken to address this 
issue are described below.

ICE will take the necessary steps to determine the best utilization of 
the Non-Work Alien (NWA) data, but there are significant technical, 
procedural and funding impediments to accomplishing this:

* NWA file information is cumulative (going back 38 years). This data 
contains annual earnings report information pertaining to approximately 
574,000 individual Social Security numbers and many pertain to persons 
who have become United States citizens or legal resident aliens since 
obtaining non-work Social Security cards as non-work authorized aliens. 
Determining which of the NWA cardholders are now legal workers could 
prove to be a cost-ineffective undertaking that would pull resources 
from other national security-related initiatives.

* NWA files information would have far greater value to ICE as an 
enforcement tool if the files contained the Alien Registration Numbers 
(or admission numbers) of the (NWA-SSA) cardholder. Although this 
corrective action has been suggested to SSA, to date it has not been 
implemented.

* The SSA mainframe computer cartridge containing the NWA file 
information is incompatible with ICE computer hardware/software 
systems. Opening and viewing the data will require the services of an 
outside contractor and funding to procure these services.

* When technical difficulties are overcome, and the data in the 
computer cartridge can be viewed, NWA information can be used as a tool 
to develop leads using analytical software, enforcement indices, and 
data sets.

We thank you again for the opportunity to provide comments on this 
draft report and look forward to working with you on future homeland 
security issues.

Sincerely,

Signed by: 

Steven J. Pecinovsky: 
Acting Director: 
Departmental GAO/OIG Liaison: 

[End of section]

Appendix V: GAO Contacts and Staff Acknowledgments:

GAO Contacts:

Barbara Bovbjerg, (202) 512-7215; 
Daniel Bertoni, (202) 512-5988:

Staff Acknowledgments:

In addition to those named above, the following team members made key 
contributions to this report throughout all aspects of its development: 
William Staab and Paul Wright. In addition, Jean Cook, Gerard Grant, 
Luann Moy, Daniel Schwimer, Vanessa Taylor, and Wayne Turowski made 
contributions to this report.

FOOTNOTES

[1] SSA is also required to maintain earnings records for self-employed 
individuals and has a separate ESF for these submissions. We have 
focused only on employer-submitted earnings reports in this analysis.

[2] For example, if a worker has no matched earnings report for 1995, 
but has matched earnings reports from the same employer for roughly the 
same level of earnings for 1994 and 1996, SSA will attempt to find a 
suspended earnings report with a different worker's name from that same 
employer that possibly could apply to the worker. If SSA finds a 1995 
suspended earnings report that appears to be roughly parallel to the 
1994 and 1996 matched earnings reports, SSA credits the 1995 report to 
the worker in question.

[3] The Social Security Statements were formerly known as Personal 
Earnings and Benefit Estimate Statements (PEBES).

[4] SSA advises employers who file W-2s electronically to use all zeros 
in the SSN field when they do not have a number for their worker; 
employers who file paper W-2s are to record "applied for" in the SSN 
field of the W-2, which SSA then converts to all zeros.

[5] SSA officials informed us that their systems no longer accept 
nonalphabetic characters.

[6] We excluded all ESF reports under the SSN 000-00-0000 from this 
particular analysis. Because there were so many reports under this SSN, 
inclusion of related records would have greatly inflated the number of 
occurrences.

[7] Social Security Administration, Office of the Inspector General, 
Patterns of Reporting Errors and Irregularities by 100 Employers with 
the Most Suspended Wage Items (September 1999).

[8] U.S. Census Bureau, Current Population Survey, Annual Social and 
Economic Supplement, 2003, Table 1.7: Employment Status of the Civilian 
Population 16 Years and Over by Sex and by U.S. Citizenship Status: 
2003.

[9] Because of concerns about not having the most recent citizenship 
data, SSA officials told us that it is difficult to use SSA's databases 
to definitively identify the extent of unauthorized work among the 
persons who received reinstatements. As a result, only an approximation 
can be made. While US citizens are automatically authorized to work, 
only foreign-born persons who meet certain criteria may work while in 
the United States. One way to assess the possible extent of 
unauthorized work among the foreign-born is to determine how many had 
earnings in a tax year preceding the year they received a SSN and 
became authorized to work. For example, we examined how many persons 
had earnings in tax year 1990 but received their Social Security card 
in tax year 1991 or later.

[10] This analysis includes reinstatements done between the inception 
of the program and 1985.

[11] The W-4 can be modified whenever necessary to reflect changes, 
such as the number of claimed withholding exemptions, changes in a 
person's name, or filing status.

[12] IRS regulations require such workers to present their Social 
Security card at a later time. If workers do not comply, the 
regulations do not require any action against the workers.

[13] Pub. L. 99-603, November 6, 1986.

[14] Employers must examine either 1 of 10 documents that both 
establish a person's identity and work authorization or 1 document from 
a list of 12 that establishes the person's identity and 1 document from 
a list of 7 that establishes his or her work authorization.

[15] See GAO, Illegal Aliens: Fraudulent Documents Undermining the 
Effectiveness of the Employment Verification System, GAO/T-GGD/ HEHS-99-
175 (Washington, D.C.: July 22, 1999).

[16] See GAO, Immigration Enforcement: Challenges to Implementing the 
INS Interior Enforcement Strategy, GAO-02-861T (Washington, D.C.: June 
19, 2002).

[17] See GAO, Tax Administration: IRS Needs to Consider Options for 
Revising Regulations to Increase the Accuracy of Social Security 
Numbers on Wage Statements, GAO-04-712 (Washington D.C.: August 31, 
2004).

[18] Internal Revenue Service, Large and Mid-Size Business Division, 
The Form W-2 SSN/Name Mismatch Project (Washington, D.C.: April 28, 
2003).

[19] IIRIRA of 1996 was enacted within a larger piece of legislation, 
the Omnibus Consolidated Appropriations Act, 1997 (Pub. L. 104-208, 
Sept. 30, 1996).

[20] The Immigration and Nationality Act requires the Department of 
Labor to participate in conducting inspections of employers' compliance 
with the I-9 completion and maintenance requirements. DHS is solely 
responsible for imposing sanctions.

[21] DHS officials told us that their systems now capture SSNs for 
resident aliens and other work-authorized aliens. However, aliens not 
authorized to work do not receive an SSN upon admission to the United 
States and only obtain one after they are work authorized.

[22] Neither SSA nor DHS charge employers a fee to use this service.

[23] SSA's Web-based system under development is called the Social 
Security Number Verification System.

[24] On March 1, 2003, those functions performed by the Immigration and 
Naturalization Service related to monitoring individuals entering the 
United States and verifying work authorization were transferred to DHS.

[25] Institute for Survey Research/Temple University and Westat, 
Findings of the Basic Pilot Program Evaluation (Washington, D.C.: June 
2002).

[26] The Basic Pilot Program Extension and Expansion Act of 2003 (Pub. 
L. 108-156, December 3, 2003).

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