While working this past summer in the employment unit of Greater Boston Legal Services, I was assigned research regarding a problematic practice of the Massachusetts Department of Revenue ("the DOR"): requesting information from taxpayers regarding their social security numbers. The practice is problematic because not every taxpayer has a social security number; in particular, undocumented immigrants do not have them. Undocumented immigrants are, of course, generally not supposed to work, but they do, and since they work they must pay taxes. Since the DOR's bailiwick is tax collection, not immigration enforcement, they ought not to create trouble for immigrants who pay taxes. This is unwarranted harrassment of immigrants, and I was asked to investigate whether the DOR has the authority to engage in these practices. I argued that it does not, and the DOR has pledged to stop.
The particulars are as follows. From one taxpayer, the DOR requested "[v]erification that the social security umber listed above is your social security number," along with requests for a validated photocopy of the taxpayer's social security number card; a written statement explaining why the employer has a different SSN listed for the taxpayer than the one used on the tax return; verification from the IRS that the stated SSN is actually an Individual Taxpayer Identification Number ("ITIN"); and copies of pay stubs. The taxpayer was given ten days to supply all of this information, and was threatened with withholding by the DOR of credits claimed on the tax return.
From another taxpayer, the DOR wanted a "response... why there is a Social Security Number on your W-2 and why your employer reports your earnings with this Social Security Number."
At least the following are potentially problematic practices:
(a) The request for particular documents such as pay stubs.
(b) The request for verification of SSNs.
(c) The threat to withhold a credit claimed on the tax return without an audit.
In this post, I'll discuss the request for pay stubs and or SSN verification, both of which I believe are inappropriate for the same reason. The threat to withhold tax credits without an audit is also inappropriate, I believe, but I'll discuss it on another day.
The demand that taxpayers produce pay stubs seems silly, in light of the fact that there's no federal or state requirement that employers issue pay stubs to employees. Even if employers were required to issue them, it is not clear that taxpayers would be required to keep them. The relevant regulation does not mention pay stubs in particular, but requires taxpayers to "preserve and maintain permanent books of accounts or records, sufficiently accurate and complete" to establish tax liability. Elsewhere in the same regulation, income tax payers are required to "keep such records as would enable the Commissioner to determine the correct amount of tax due."
If the DOR did promulgate a regulation requiring taxpayers to hold on to their pay stubs, it might not pass the reasonability test. The DOR is only permitted to make "such reasonable regulations... as may be necessary to interpret and enforce" Massachusetts tax statutes. The statutes themselves do not require taxpayers generally to retain records, although they require certain categories of taxpayers to do so, and they permit the DOR to inspect tax records generally.
As to the DOR requesting verification of Social Security Numbers, it is inappropriate for largely the same reasons: there appears to be no regulation that permits the DOR to ask for such things, and if there was, such a regulation would be unreasonable and therefore not within the scope of DOR's ability to promulgate regulations.
What happened: a senior attorney from GBLS discussed things with the DOR, and they pledged to cease the practices I've mentioned. I see it as a win-win: the individual taxpayer wins because she gets harrassed less, and the government wins because in the absence of harrassment, the individual is more likely to pay her taxes.
If you find yourself in this situation, please make your first stop MIRA rather than GBLS, which is already swamped with taxpayer issues.