In April, the IRS sent CP2100 and CP2100A notices to banks, credit unions, businesses or payers who filed returns that don’t match IRS records.
These information returns include:
- Form 1099-B, Proceeds from Broker and Barter Exchange Transactions
- Form 1099-DIV, Dividends and Distributions
- Form 1099-G, Certain Government Payments
- Form 1099-INT, Interest Income
- Form 1099-K, Payment Card and Third-Party Network Transactions
- Form 1099-MISC, Miscellaneous Income
- Form 1099-NEC, Nonemployee Compensation
- Form 1099-OID, Original Issue Discount
- Form 1099-PATR, Taxable Distributions Received from Cooperatives
- Form W-2G, Certain Gambling Winnings
The IRS mails these notices out twice a year, in September and October and again in April of the following year. The notices tell payers that the information return they submitted is missing a Taxpayer Identification number or has an incorrect name or both.
Each notice has a list of payees with identified TIN issues. Payers need to compare the accounts listed on the notice with their account records and correct or update their records, if necessary. This can also include correcting backup withholding on payments made to payees.
It is common to report an incorrect Tax Identification Number (TIN) or name when filing 1099 forms with the IRS. Sometimes it could be a typo, or it could be because the vendor provides their business name with their social security number (SSN), or vice versa. To prevent the IRS from issuing penalties for inaccurate reporting, it is recommended that you verify the accuracy of the recipient’s Tax Identification Number (TIN) before filing 1099 forms.
What Is A TIN?
A TIN is a Taxpayer Identification Number and includes both a Social Security Number and an Employer Identification Number and is used to administer tax laws. A TIN is either issued by the Social Security Administration (SSA) or by the IRS. A Social Security number (SSN) is issued by the SSA, whereas the IRS issues all other TINs.
The Most Common Taxpayer Identification Numbers
- Social Security Number “SSN“
- Employer Identification Number “EIN“
- Individual Taxpayer Identification Number “ITIN“
What Happens If There Is A TIN Error On A 1099?
When you file 1099 with inaccurate TIN and name combination, the IRS issues CP2100 or CP2100A notices (error notice), letting you know that you may be responsible for backup withholding (24% of future vendor payments).
You are then required to send B-Notices within 15 days to the payee and collect correct information on the W-9 form or start backup withholding. The 24% in backup withholding has to be remitted to the IRS per a strict Form 945 deposit schedule, and there are additional annual solicitation requirements.
The IRS penalty for a mismatched Tax ID/name combination could be as high as $280.00 per mismatch TIN/Name combination. You can avoid this penalty by using a TIN Matching service.
How Does TIN Matching Work?
A TIN matching service, such as Aatrix eFile, can work seamlessly with your payroll and accounting software. Choose the TIN Matching Report and submit your files, and the system will check for any discrepancies and inform you so that you can verify the information with your recipient and correct it.
If companies choose to NOT use a TIN matching service, it may be difficult and time-consuming to obtain IRS authorization to the TIN matching program.
- You may be required to request access months in advance of your need.
- The employee applying for TIN matching must provide their personal information to the IRS to access the TIN matching site.
- The information required includes the employee’s mobile number and specific personal financial account numbers.
- Two-factor authentication must also be set up.
Like many government services, this process may be challenging to follow, so the best practice is to utilize a service that gathers the information directly from your software, makes the matching request, and provides the report directly to you.
Is TIN Matching Required?
TIN matching is not required, but it is recommended to make sure you are filing 1099s accurately.
What Happens If The TIN Does Not Match IRS Records?
The TIN Matching Report will NOT give you the corrected information. At this point, you must contact the individual or company and request a corrected W9. However, the report will return a code between 0 and 8. This code will tell you whether the name/TIN match combination matches IRS records. See below that details the nine possible codes.
- “0” – indicates the name/TIN combination matches IRS records.
- “1” – indicates TIN was missing or TIN is not a nine-digit number.
- “2” – indicates TIN entered is not currently issued.
- “3” – indicates the name/TIN combination does not match IRS records.
- “4” – indicates an invalid TIN Matching request.
- “5” – indicates a duplicate TIN Matching request.
- “6” – (matched on SSN), when the TIN type is (3), unknown, and a Matching TIN and name control are found only on the NAP DM1 database.
- “7” – (matched on EIN), when the TIN type is (3), unknown, and a matching TIN and name control are found only on the EIN/NC database.
- “8” – (matched on EIN and SSN), when the TIN type is (3), unknown, and matching TIN and name control is found only on both the EIN/NC and NAP DM1 databases.