Social Security:

Reconciliation Improved SSA Earnings Records, but Efforts Were Incomplete

HRD-92-81: Published: Sep 1, 1992. Publicly Released: Oct 14, 1992.

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Pursuant to a congressional request, GAO reviewed the efforts of the Social Security Administration (SSA) and the Internal Revenue Service (IRS) to correct accuracy problems in SSA earnings records, focusing on: (1) SSA and IRS actions under their memorandum of understanding (MOU) and their adequacy; (2) whether SSA and IRS have met their MOU commitments; (3) the outcome of the reconciliation efforts; and (4) possible improvements to the wage-crediting process.

GAO found that: (1) after the implementation of a formal reconciliation process, SSA and IRS have made substantial progress in reducing the discrepancies between the wages reported to each agency by employers; (2) SSA cannot determine the actual amount of new wage data because it only broadly monitors the nature of employer responses; (3) IRS did not meet all of its MOU commitments, which reduced the potential success of the reconciliation process; (4) employers file inaccurate SSA wage reports because they often do not understand regulations on wages, reporting requirements, and the relationships among the various wage reports they must file; (5) further improvements in the reconciliation process and the prevention of employer wage-reporting errors could further reduce reported discrepancies; (6) the Treasury Department has credited and continues to credit billions of dollars to the social security trust funds that are not supported by SSA wage reports; and (7) a collection-based funding system for the social security trust funds would be consistent with the historic funding of the programs and would more accurately capture monies due the trust funds.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Matter for Congressional Consideration

    Matter: Congress may wish to consider amending section 201(a) of the Social Security Act to require that revenues credited to the social security trust funds are based on the amount of social security taxes collected each year, including interest and penalties, and have the Secretary of the Treasury certify to the amount of social security taxes collected.

    Status: Closed - Not Implemented

    Comments: There are no plans to revise legislation needed to implement this recommendation.

    Recommendations for Executive Action

    Recommendation: To improve the process for reconciling differences in wage reports and employer reporting accuracy, the Commissioner of Social Security should place more emphasis on identifying and addressing causes of employer problems in reporting wages. SSA should examine the clarity of its wage-reporting instructions and consider how it can better respond to employer wage-reporting questions, such as by providing a single contact point for employers.

    Agency Affected: Department of the Treasury: Internal Revenue Service

    Status: Closed - Implemented

    Comments: SSA has taken a variety of actions that address this recommendation: (1) issuing new and revised publications; (2) implementing its own electronic bulletin board system for employers; (3) continuing education and public awareness campaigns; (4) sponsoring employer payroll conferences two times a year; and (5) improving systems for handling reconciliation cases.

    Recommendation: To improve the process for reconciling differences in wage reports and employer reporting accuracy, the Commissioners of Internal Revenue and Social Security should amend the MOU to ensure that reasonable efforts are made to contact employers whenever SSA does not have its reconciliation letters delivered.

    Agency Affected: Department of the Treasury: Internal Revenue Service

    Status: Closed - Implemented

    Comments: IRS has made changes to its computer program to work undelivered cases referred by SSA this year. The new procedures will be reflected in the next revision to the MOU.

    Recommendation: To improve the process for reconciling differences in wage reports and employer reporting accuracy, the Commissioners of Internal Revenue and Social Security should amend the MOU to ensure that reasonable efforts are made to contact employers whenever SSA does not have its reconciliation letters delivered.

    Agency Affected: Social Security Administration

    Status: Closed - Implemented

    Comments: IRS has made changes to its computer program to work undelivered cases referral by SSA this year. The new procedures will be reflected in the next revision to the MOU.

    Recommendation: To improve the process for reconciling differences in wage reports and employer reporting accuracy, the Commissioner of Internal Revenue should comply with all agreed-upon provisions of the MOU. IRS should contact all employers in cases referred by SSA under the terms of the MOU, eliminate any penalty tolerance that is not in accord with the MOU, and take prompt action to issue regulations to mandate the filing of W-2s within 30 days after a business terminates operations.

    Agency Affected: Department of the Treasury: Internal Revenue Service

    Status: Closed - Implemented

    Comments: IRS regulations have been issued to require that businesses terminating operations in 1997 must file form W-2s for their employees with SSA within 1 month after filing their final Estimated Quarterly Tax Return with IRS. The penalty tolerance issue, however, remains unresolved with no indication of when, if ever, it may be settled.

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