Dive Brief:

• The IRS has finalized rules permitting payroll staff to use truncated Social Security numbers on employee W-2 forms.
• The rules are in effect for returns filed after Dec. 31, 2020.
• Starting with those filings, executives can replace the first five digits of employees' Social Security numbers with Xs or asterisks, in the following manner: XXX-XX-1234 or ***-**-1234. 

Dive Insight:

There were 14.4 million victims of identity theft in 2018, according to Javelin Strategy & Research.

The change is a protective measure to make employees' Social Security numbers harder to access by unauthorized people, the IRS said.

"To aid employers' efforts to protect employees from identity theft, these regulations amend existing regulations to permit employers to voluntarily truncate employees' social security numbers (SSNs) on copies of Forms W-2, Wage and Tax Statement, that are furnished to employees so that the truncated SSNs appear in the form of IRS truncated taxpayer identification numbers (TTINs)," the IRS says in the preamble to the rules.

The rules prohibit use of the truncated SSNs on Forms W-2 that are being sent to that agency or to the IRS. They are also not allowed on Forms W-2 being provided on a statement furnished to the employer of a payee who received sick pay from a third party.