Final answer:
The IRS requires employers to see a corrected social security card before reporting an employee's new name on Form W-2, to ensure proper tax reporting and matching with the employee's Social Security number.
Step-by-step explanation:
When an employee undergoes a legal name change, the IRS suggests that the employer should see a corrected social security card before reporting the new name on Form W-2. This is to ensure that the employee's new name is accurately matched with their Social Security number. While the other documents mentioned, such as an amended Form W-4 or a court document, might be relevant for other aspects of employment records, it is the Social Security card that the IRS specifically refers to for accurate tax reporting.
The importance of this process is rooted in historical and legal contexts, particularly with the passage of the Immigration Reform and Control Act of 1986. This act mandated that employers verify the identity and employment eligibility of their workers, primarily using the Form I-9. Although the I-9 form is critical in verifying an employee's eligibility to work in the United States, it's not the document the IRS requires for updating employee information in the context of W-2 forms.