Wrong Social Security Number on W2: How It Affects Your Tax Filing

A mistake on your W-2 can create complications, especially if it involves an incorrect Social Security number (SSN). The IRS and Social Security Administration (SSA) rely on accurate SSNs to track earnings and tax payments, so even a small error can lead to processing issues.

This mistake can delay your tax return, affect Social Security benefits, and create discrepancies in withheld taxes. Understanding how this happens and what steps to take can help you avoid unnecessary problems.

Employer Filing Obligations

Employers must ensure all W-2 information is accurate before submitting it to the SSA and providing copies to employees. The SSA uses this data to verify earnings and allocate Social Security and Medicare taxes. If an incorrect SSN is reported, the employee’s earnings may not be properly credited, which can cause issues when claiming benefits.

To prevent errors, businesses should verify employee information at hiring. The SSA offers the Social Security Number Verification Service (SSNVS), allowing employers to confirm that an SSN matches the employee’s name before filing tax documents. If a mistake is found after issuing a W-2, the employer must file a corrected W-2c along with a W-3c transmittal form.

Failing to correct an inaccurate SSN can result in fines. As of 2024, the penalty for filing an incorrect W-2 is $60 per form if corrected within 30 days, $120 if corrected by August 1, and up to $310 if left uncorrected. If the IRS determines the employer intentionally disregarded the requirement, the penalty can reach $630 per form.

IRS Record Conflicts

When the IRS processes a tax return, it cross-references the SSN with SSA records. If the number on the W-2 does not match, the return may be flagged for review. In some cases, the IRS may reject an e-filed return, requiring the taxpayer to submit a paper return, which takes longer to process.

An incorrect SSN can also cause mismatches in reported income. The IRS uses W-2 data to confirm wages and tax withholdings. If the SSN error results in wages being misattributed or missing, the agency may issue a CP2000 notice questioning discrepancies. This could lead to audits or tax assessments, requiring additional documentation to resolve.

Errors in IRS records can delay tax refunds. If income cannot be verified due to an SSN mismatch, the IRS may hold the refund until the issue is corrected. Taxpayers may need to contact both the IRS and their employer to ensure the corrected information is properly reflected in IRS systems.

Tax Filing Delays

A tax return with an incorrect SSN can face delays, especially if the IRS cannot verify the filer’s identity. Since tax returns are processed using automated systems that match taxpayer information with IRS and SSA records, any discrepancy can cause the return to be flagged for manual review. This can extend processing times from the typical 21 days for e-filed returns with direct deposit to several months if further verification is required.

An incorrect SSN can also prevent the IRS from applying tax credits like the Earned Income Tax Credit (EITC) or the Child Tax Credit (CTC), which require stricter identity verification due to fraud concerns. If a mismatch occurs, the IRS may request additional documentation, such as a copy of the filer’s Social Security card or a letter from the SSA confirming the correct number.

Refund delays can be worse if the error forces the return to be processed as a paper filing. The IRS has struggled with paper return backlogs in recent years, with some refunds taking over six months to process.

Impact on Social Security Credits

Earnings reported to the SSA determine future benefits, making accurate wage reporting essential for retirement, disability, and survivor benefits. When a W-2 contains an incorrect SSN, those earnings may not be credited to the employee’s record, potentially reducing future benefits. Since Social Security benefits are calculated based on the highest 35 years of earnings, even one missing year can lower the average indexed monthly earnings (AIME), which directly affects monthly payments.

If wages are not recorded under the correct account, an individual may also fail to earn the necessary credits to qualify for benefits. In 2024, a worker receives one credit for every $1,730 in earnings, with a maximum of four credits per year. To qualify for Social Security retirement benefits, a person typically needs 40 credits, or ten years of work. If incorrect reporting prevents credits from being assigned, an individual may need to work longer than expected to meet eligibility requirements. This can be especially problematic for those nearing retirement who may not have the flexibility to extend their careers.

Possible Withholding Discrepancies

An incorrect SSN on a W-2 can also create issues with tax withholdings, as the IRS relies on accurate reporting to track payroll taxes. If the SSN does not match IRS records, the agency may not properly associate withheld income tax, Social Security tax, and Medicare tax with the correct taxpayer. This can lead to complications when reconciling total tax liability, potentially resulting in an underpayment notice or an unexpected tax bill.

Employers submit payroll tax payments using the information provided on W-2 forms, and these payments are credited to employees based on their reported SSNs. If the IRS cannot match the withheld amounts to the correct taxpayer, the individual may not receive full credit for taxes already paid. Resolving this issue often requires submitting a corrected W-2c and working with both the IRS and the employer to ensure all withholdings are properly accounted for.