An Employer, Known to IRS, has Close to 40k Illegals on Its Payroll

By David North on October 1, 2013

Somewhere in America there is a huge employer who had, on average, about 40,000 workers a year on its payroll, most of whom probably are and were illegal aliens.

The government knows the employer's name (and does not share it) but has apparently taken no steps to correct the situation.

Similarly, there's another large employer, a different one, also known to the government, that has 98 percent of its employees in the probably illegal category; again, nothing is being done about it.

These are the largely hidden conclusions of one of those useful but color-them-grey reports from one of the government's set of inspector generals, in this case the one at the Social Security Administration.

The report came out in August and bore the bland title of "Employers Who Report Wages with Significant Errors in the Employee Name and Social Security Number".

If the worker's name and Social Security number on wage data submitted to the Internal Revenue Service do not mesh with the Social Security Administration's massive dataset, SSA sets aside the credits in an earnings suspense file, meaning that no specific worker in the future can draw against them for an SSA pension.

Meanwhile, there is the troublesome fact that some employers out there are both paying FICA (i.e., Social Security) taxes for questionable employees — which is good for the Social Security trust fund — and are also hiring what probably are illegal aliens, which is obviously bad for the American economy, and denying jobs to legal U.S. residents.

The SSA's IG, Patrick P. O'Carroll, Jr., decided to look at the 100 U.S. employers with the most SSN mismatches, as well as the 100 employers with the largest percentage of such mismatches on its payrolls. There can be plausible reasons for some of these mislinkages, such as an unrecorded legal name change, but in a typical IG understatement the report says "[W]e believe that the magnitude of incorrect wage reporting may indicate SSN misuse."

And the magnitude of the numbers is remarkable.

Bear in mind that the IG is only talking about two groups of 100 employers each. If there is an overlap it is not mentioned.

The 100 with the largest numbers of mismatches had, during the tax years 2007-2009, 2.3 million "wage items", most of which meant a single suspect worker employed during a year by a given employer. That works out to about 800,000 probable illegal aliens on the payrolls of those 100 employers in each of those years. One would need to multiply that number several times over to get the total number of illegals working for firms who paid FICA taxes on such workers. The largest of these had 117,792 mismatches in a three-year period, or nearly 40,000 a year.

This group of shameful employers had about 18 percent of their workers in the suspect category. And the average wage they paid to these workers was about $6,826 a year. (Many of these workers, of course, could have been employed for less than a full year.)

The other 100 employers, most presumably smaller in size, had 93 percent of their work force in the mismatch grouping, and the average wage for these jobs was only $3,684. That the employers with very high percentages of suspect workers paid considerably less per year than the other set of employers is not surprising.

What the employers did not do, though they could have done, was to check their payrolls against E-Verify or the Social Security Number Verification Service, either of which would have alerted them to workers with dubious SSNs. This, presumably, was a conscious decision.

What the government did not do, in these cases, was to enforce the available IRS penalties against inaccurate wage reporting — much less seek the enforcement of employer sanctions. IRS regulations call for a $15-$50 fine for each W-2 error; had IRS collected at the $50 level, the Treasury would have been more than $115 million richer.

My image of this situation is of a state trooper, complete with a radar gun and with his squad car engine running, standing by the side of the road writing down the license numbers of the cars whizzing past at 90 mph, but issuing no tickets.

The IG also presented a brief analysis of what kind of inappropriate SSNs were recorded among the more than two million cases analyzed in this report. Most (1.3 million) belong to other living adults, some quarter of a million to dead workers, and more than one third of a million were assigned to living children (under the age of 13), which will foul up the latter's lives at some point in the future.

The small grouping I think most intriguing were those that used the area number within the SSN (the first three digits of the nine-digit number) as 666.

These three numbers, which have a sinister meaning in the Book of Revelation, have long been blotted out in the issuance of legitimate SSNs by the government, so if they show up on W-2s they are obviously illicit. Some illegal aliens and their employers either do not know this, or do not care, and 358 of the bad numbers started with 666. Those three digits are sometimes called the "number of the beast".

Another, and more pertinent, sidelight: the IG's report, though it does not touch this subject, reminded me that there is a hierarchy among employers that looks like this:

  1. Good guys — employers that do not hire illegal aliens.

  2. Bad guys — those that hire some illegal aliens, but pay FICA.

  3. Even worse guys — those that hire primarily illegals, but pay FICA.

  4. Very, very bad guys — those that hire illegals, but pay cash and do not pay FICA.

  5. The worst — those that hire illegals, albeit briefly, and don't pay them at all, a small group.

The government has the tools in hand to penalize those in classes 2 and 3, but as so often is the case, this administration has opted not to use them.

Topics: Tax Fraud