Social Security

Each year, millions of workers pay social security taxes on earnings that cannot be credited to their social security accounts because the Social Security Administration (SSA) does not have enough information to identify the correct accounts for these earnings. As a result, workers may end up shortchanged years later when they begin receiving social security benefits. Through routine tax administration activities, the Internal Revenue Service (IRS) obtains taxpayer identity data that could help SSA resolve uncredited earnings recorded in its suspense file. In GAO's view, this information, which IRS requires as a condition for paying tax refunds, could greatly benefit SSA resolution efforts. IRS reports show that in 1989 more than 776,000 taxpayers responded to its requests about the identity question to obtain a release of their tax refunds. IRS does not, however, keep the taxpayer responses, and GAO was unable to estimate the potential suspense file resolution value to SSA. Spouse names from some joint tax returns would also help SSA credit earnings to workers' accounts. IRS data could be helpful when SSA's crediting problems relate to unreported changes in surnames. With this data, SSA could resolve an estimated 79,000 uncredited earnings cases valued at $556 million for tax year 1989 alone.

GAO found that: (1) IRS has two sources of identity data that could assist SSA efforts to resolve its earnings identification problems; (2) IRS does not release tax refunds whenever a taxpayer uses an invalid surname or social security number (SSN) on his tax return; (3) when this happens, IRS sends a notice to the taxpayer asking him to compare the name and SSN used on his return with similar information on his social security card, and to report any errors; (4) IRS releases the refund after taxpayers respond to this notice; (5) IRS received about 776,000 responses from taxpayers on their identity problems, but after correcting its records when appropriate, IRS destroyed the responses; (6) the responses were not shared with SSA, so the value of this information for correcting SSA records could not be determined or estimated; and (7) spouses' names on tax returns can help SSA resolve an estimated 79,000 items, worth $556 million in uncredited earnings, in its suspense files each year.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Team: Phone: