TIN Matching: What It Is and Why You May Need It for Annual Tax Filings

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They’re baaaaaaaack! After a seven-year break, the Social Security Administration is once again issuing Social Security number (SSN) no-match letters to employers whose submissions don’t match the administration’s records. You may receive one of these no-match letters – also called an “Employer Correction Request” – if there’s a problem with any name and SSN combination with a W-2 filing.

The Internal Revenue Service (IRS) doesn’t currently send out these letters, but they can reject 1099s that have incorrect TINs. (A TIN, or taxpayer identification number, is simply the SSN or Employer Identification Number, or EIN.)

Fortunately, there’s a way to prevent the most common types of errors with both W-2s and 1099s, which can help you avoid no-match letters as well as potential IRS penalties.

Reasons for Errors

Mismatches can happen for a number of reasons – from typos and transposed numbers to unreported name changes with a marriage or divorce. The bigger concern, however, is missing, incomplete or outright false SSNs. Because the SSA is keeping a watchful eye on this and sharing data with other government agencies, it’s vital to carefully check employee data when filing W-2 tax forms. The same is true for independent contractor data with 1099 forms.

But how can you do this? The ideal tool for verifying recipient data before filing W-2s with the SSA and 1099s with the IRS is a web-based TIN Matching service.

Many online e-file providers today offer this additional service. By seamlessly incorporating a TIN Matching service into the tax-filing process, you can prevent missing TINs or incorrect name/TIN combinations and, in turn, rejected forms, no-match letters and potential IRS penalties. You’ll learn of any discrepancies beforehand, which you can verify with the recipient and correct before forms are e-filed. The ideal time to use a TIN Matching service is pre-season, so May through December. In many cases, you can submit a multi-record data file, paying only a single fee for the entire file.

What If You Get a No-Match Letter?

Unlike in the past, letters from the SSA don’t include the names and SSNs of employees with mismatched SSNs. You must register with the SSA’s Business Services Online (BSO) to get this information. After that, you should:

  • Check your records for a clerical error
  • Correct the error by filing a Form W2-C within 60 days of receipt of the letter
  • For other discrepancies with an SSN, notify the employee (see this sample letter from the SSA)
  • Allow a reasonable amount of time (typically 30-90 days) for the employee to resolve the issue with the SSA
  • Document all steps taken to comply with the matter

Similarly, if notified by the IRS of TIN errors, you should request the correct information from the employee, document your efforts and, if necessary, notify the IRS of your attempt to obtain the proper information. This “safe harbor” procedure can protect you from monetary penalties.

Even though receiving no-match letters doesn’t necessarily mean you’ve done something wrong, they require prompt attention. If you learn of an SSN mismatch and fail to address it, the U.S. Immigrations and Customs Enforcement (ICE) could consider you to have “constructive knowledge” of hiring an unauthorized worker. At the same time, you must be careful not to take adverse action against an employee (such as suspension or firing) based solely on a no-match letter, which could open the door to a discrimination lawsuit. Always notify the employee and allow him or her to provide the appropriate and/or corrected information.

Boost Convenience and Accuracy with Your Annual Tax Filings

In addition to working with a quality e-file provider to streamline the filing, printing and mailing of W-2s and 1099s, you can take advantage of additional services to improve accuracy and efficiency. Efile4Biz.com is the ideal platform for handling these filings, allowing you to double-check payer and recipient information through the “print preview” feature, use TIN Matching and make quick, online corrections errors.

The SmallBizRising Blog is designed to be an educational content hub pulling information, best practices and practical advice for the small business owner and features topics including accountingmarketingtechnology and more.  Be sure to subscribe to stay up to date with new content as it is posted.  The blog was created by The Neat Company and receives contributed content from a group of contributing companies that provide technology, services and solutions to small businesses.

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