The Importance of TIN Match
The IRS recently raised its penalties on incorrect and late filings (again). TIN match can potentially help you save yourself or your clients some money.
What is TIN Match?It’s a tool to confirm the name and taxpayer identification number for 1099 vendors. We check the information for you with the IRS database. That way you know you are filing with the most correct information.
Can I Do TIN Match Myself?Yes! You can register with the IRS E-Services tool. Plan on the process taking a few weeks to complete. The IRS needs to confirm your SSN and name along with some tax details you enter. Then they will send you a login ID and password via the US Postal Service.
Once you receive the login, you will have several steps to complete:
- Login to the site.
- Select the organization you will represent during the session.
- Select TIN Matching.
- Accept the TIN Matching Terms of Agreement.
- Choose to begin an Interactive or Bulk Session.
- Interactive Session in step 5 - you can enter between 1 and 25 TIN and Name combinations.
- Bulk Session in step 5 - you must upload a file that matches the IRS’s requirements.
For Bulk Sessions, you receive results in a few hours to a day or two.
The results are numeric values that you will need to translate using the key the IRS provides.
You must track the results yourself somewhere so you can refer to them later. A master spreadsheet can work for this purpose.
An Easier WayYou can also have a service perform all these tasks for you. Tax1099.com offers TIN Match which uses the Bulk Session feature. You enter or import your vendors the same way you do to create your 1099s. Select TIN Match and the site takes care of the rest. You get an Accepted or Rejected status for each Match requested. Those results remain online in your account.
Is TIN Match Necessary?The IRS validates the TIN in their database when you file a 1099. When they receive a TIN/name combo that doesn’t match they issue a CP2100 or CP2100A. That means the Payer has to issue a B-notice to the Recipient. Later you may receive a penalty notice if the incorrect information is not fixed.
Those penalties can be up to $260 per occurrence. Even for a small filer a few of those will add up to an amount you don’t want to pay. The largest penalty is $3,000,000 with a smaller max for small businesses.
Being proactive and using a TIN Match service can help you or your clients avoid those penalties. Check the TIN and name before issuing payment to provide even more protection. Doing the match that way also encourages the vendor to comply since they know you won’t pay until they do.
What Happens when the Info Doesn’t Match?When the IRS rejects your TIN Match, you should follow up with the vendor to confirm the information. Collecting a W-9 is the proper way to do this, but you may have already collected a W-9 from the vendor. In that case, it may be a good idea to call or email the person who completed the form. Often there is confusion over what name to enter in the name lines on the W-9 form.
For clarification, line 1 on the W-9 is for the taxable entity name. That may be the individual’s name if they operate a sole-proprietorship or single-member LLC, even if they designated a “doing business as” name when they created their Employer Identification Number. For those two entities, the IRS actually prefers they enter their SSN, but will accept the EIN as well.
Line 2 on the W-9 is for a business or disregarded entity name. This is where the “doing business as” name belongs.
When vendors confuse those, they aren’t trying to get away with something (usually). They just don’t know what goes where.
Compliance Is KeyThe government has increased inspection of filers in the last few years. Using tools like TIN Match helps you stay in compliance. Proactive checking is something the IRS recommends. They also review your TIN Match process when they develop a penalty notice. Checking the TIN/name combinations can help you reduce the penalty in the first place.
Bottom line: Institute a TIN Match practice as soon as you can. There is no reason to risk the IRS scrutiny and penalty.
Learn more about how we can ease your January with our TIN Match feature.