WASHINGTON — The massive tax bill that appears headed for certain enactment contains an unpleasant surprise for parents: It requires that all children who are at least 5 years old next year have Social Security cards by 1988 if their parents claim them as dependents on their federal tax returns.
The new rule, aimed at cutting down the government's multibillion-dollar loss of tax revenue from taxpayers claiming personal exemptions they do not deserve, also will provide the Social Security Administration with a monumental bureaucratic challenge and could prove to be a substantial nuisance to parents.
9 Million Seen Affected
The Social Security Administration estimates that parents will line up to get cards for 9 million children as a result of the new rule. Beginning with tax forms filed in 1988 for the 1987 tax year, parents will have to list the Social Security numbers as well as the names of all dependent children 5 years old or older.
Congress inserted the provision into the tax bill at the request of the Internal Revenue Service, which says that taxpayers file false claims for 8.3 million children a year as dependents. With Social Security numbers, the IRS will be able to check the validity of personal exemptions.
Some of the children now claimed as exemptions do not exist, the IRS says, and others are grown up and working on their own. Some divorced parents both claim the same child as a dependent, although only the parent providing the bulk of financial support is entitled to do so.
The new rule should deter taxpayers who have been claiming their dogs or other pets as dependents, said an accountant who asked not to be identified. "Dogs don't have Social Security numbers," he said.
And the IRS foresees a growing temptation to cheat because the tax bill will increase the personal exemption from $1,080 this year to $1,900 next year and $1,950 in 1988. The revenue drain from illegal exemptions could grow to $5.6 billion by 1990, the IRS estimates, if the current practice of listing only each dependent's name on the tax form were to remain unchanged.
Age Selection Arbitrary
The choice of age 5 was arbitrary, according to a House staff member who asked not to be identified. "We expect most people will apply in person at Social Security offices," he said, "and we didn't want to force mothers to bring in infants or very young children."
The effective date was postponed until 1988 to give Social Security officials time to prepare for the expected flood of applications.
The Social Security Administration, which says it typically issues 6 million new cards and 8 million replacement cards a year, expects an extra 9 million applications by April 15, 1988. There are many more children than that between age 5 and working age, but many of them already have Social Security cards.
"We will be able to do it," said Social Security Commissioner Dorcas R. Hardy, who has established a task force to determine how to cope with the new workload. The Social Security Administration has already dubbed the program TINs for tots--short for taxpayer identification numbers.
To obtain Social Security cards for each child, parents must provide two original documents--photocopies are not valid--verifying the child's age and identity. Among the usual documents are birth certificates, hospital or doctor records, baptismal or confirmation certificates, report cards or records from day care centers or schools, vaccination certificates, welfare records or membership cards in the Girl Scouts, Boy Scouts or any other youth organization.
Vow 10-Day Response
Parents may present the documents at a Social Security office or mail them along with a two-page application. The Social Security Administration promises to send back the child's card within 10 days, along with the identification documents.
The new workload comes at a time when the Social Security Administration, which handles 205 million active card accounts, is reducing its work force. The agency hopes to eliminate 14,000 of its 70,000 jobs through attrition by 1990.
The Social Security numbers for children will enable the IRS to use its computers for cross-checking of possible illegal exemptions.