A Users Guide to More Accurate Tax Filings
A tax identification number or TIN may be a Social Security Number (SSN), Employer Identification Number (EIN), Individual Taxpayer Identification Number (ITIN), or Adoption Taxpayer Identification Number (ATIN). A valid Social Security Number may only be issued by the Social Security Administration. An EIN, ITIN or, ATIN may only be obtained through the IRS. Having the correct TIN is essential when filing W-2s, 1099s and ACA forms.
Accounting professionals (typically Accounts Payable) should obtain the TIN/EIN of a business or individual during the onboarding process by requiring a W-9, a tax form for the Request for Taxpayer Identification Number and Certification.
Where Most Errors Occur
Mismatches can happen for a variety 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 and contractor data when filing tax forms.
Less Errors, Greater Efficiency with TIN Matching
The best way to ensure that you report the correct TINs in your information returns is to validate the TINs as and when you receive them from the vendor/payee through Form W-9. If, after validation, you conclude that the provided information is incorrect, you can request the vendor to provide the correct TIN and legal name until they furnish the right information. Ideally this process happens as you onboard each new employee or vendor throughout the year.
What happens if I have the wrong TIN?
When filing your W-2’s or 1099’s, your recipient TIN and name must be complete and match what the IRS/SSA has on file. If it doesn’t, your organization may receive a “B Notice” and eventually a penalty notice. The typical penalty for incorrect TINs is $290 per record so it’s critical that you get this right to avoid these hefty fines.
Putting a Plan into Motion
Tax information reporting is a year-round activity and obligation. Don’t wait until the last minute to ensure you have the correct information and documentation. Tax rules can change from year to year, make sure you understand the latest requirements.
You should start by understanding the implications of name/TIN matching and how this impacts your ability to file accurate returns. Familiarize yourself with the services available to help you and know how to avoid the costly penalties associated with filing incorrect returns.
Put a timeline in place and stick to it. Here is a sample timeline you can use as a guide for your own organization:
- Conduct proactive TIN check of all recipient information
- Solicit correct W-9’s if any errors are found
- Update recipient information in accounting systems
Review the “Be in the Know” season prep newsletter from eFileMyForms for any 1099 reporting changes that may impact your business.
- Gather required data and create forms
- Conduct final TIN check to ensure accurate filings
- Deliver forms to recipients and filings to IRS / SSA
- File 1099-NEC direct state reporting where required
Address any corrections as required
- File 1042-S Reporting
- File 1095 ACA Reporting
- File any remaining federal reporting as required