Verifying the accuracy of Taxpayer Identification Numbers (TINs) helps you to avoid reporting mistakes, ensure smooth tax filings, and maintain KYB/KYC compliance. TIN verification verifies if the provided TIN and name are a match, whether you are verifying an employee or a vendor. This helps identify discrepancies early on, thereby saving time, money, and resources.
In this article, we discuss the significance of TIN verification, avoidable errors, and using automated tools such as EINsearch’s dedicated TIN matching service to streamline the process and attain accuracy in tax-related activities.
What is TIN verification?
TIN verification is the process of verifying whether the given Taxpayer Identification Number of the person or business is correct or not. It is a unique number created by the IRS and used to report information to the IRS and to comply with tax requirements. To prevent errors in tax filings and reporting, the TIN is verified as being associated with the name in IRS records.
Companies often use this tool to verify employee and vendor information to make sure that W-2s, 1099s and other tax forms are accurately submitted. Utilizing effective TIN verification can go a long way in helping you reduce penalties, avoid delays, and keep up with requirements.
Types of TINs
There are several types of Taxpayer Identification Numbers, each serving a specific purpose:
- Social Security Number (SSN): Issued by the Social Security Administration for individuals, primarily used for personal tax reporting.
- Employer Identification Number (EIN): Assigned by the IRS to businesses for tax filing and employment purposes.
- Individual Taxpayer Identification Number (ITIN): For individuals not eligible for an SSN, such as non-resident aliens.
- Adoption Taxpayer Identification Number (ATIN): Temporary TIN for adopting parents filing taxes for their adopted child.
Why is TIN verification important?
Avoid IRS penalties
Providing incorrect TINs may lead to fines or penalties from the IRS. It’s a common issue with mismatched and unmatched forms including W-2s and 1099, but TIN validation matches the data provided against IRS records, which help avoid penalties.
Streamline tax filing
Correct TINs lead to no rejected forms and no delays in tax filing. It can eliminate the unnecessary friction associated by submitting corrected documents to the IRS, which can save a business time and resources when it comes to resubmitting the tax form.
Ensure compliance
Verifying a TIN is crucial for compliance of IRS regulations, such as those regarding the backup withholding rule. In the event of a TIN mismatch, businesses may be required to withhold a portion of payments, leading to needless hassles that proper verification can help prevent.
Save time and resources
Automated tools such as EINsearch’s TIN matching service can help accelerate the verification process. This helps businesses concentrate on their primary operations without compromising accuracy or compliance in their tax processes.
Step-by-step guide to verifying a TIN
Verifying a TIN is easy to do, particularly in the case of automating it through tools like the EINsearch TIN matching service. Here’s how it works:
- Gather required information:
Obtain the Taxpayer Identification Number and name associated with that number by the person or business you want to verify. You can obtain this information by having a W-9 filled out by the employee, vendor or freelancer.
- Choose an automated TIN matching service:
Choose EINsearch’s quick and accurate real-time TIN matching service. Plans start at $25.
- Upload or enter TIN data:
Enter the TIN and business name to verify what they have on record is consistent with IRS records.
- Initiate the verification process:
Automated systems will compare that information against IRS records to pinpoint any discrepancies.
- Receive verification results:
The system will validate information directly against IRS records and show if the TIN and name combination are a match or not.
- Take action on discrepancies:
If mismatches occur, contact that individual or entity to correct the TIN or name to resubmit.
- Repeat as needed:
Ensuring that TINs of new employees, vendors, and contractors are verified on a regular basis can help in remaining compliant and avoiding complications during tax filings.
Automated TIN verification streamlines the process. It is faster and less prone to errors. EINsearch’s TIN matching service finds results directly from the IRS to ensure you get accurate results to help businesses stay compliant and streamline their businesses.
When should you verify a business TIN?
During onboarding new vendors or contractors
If you are creating a record for a vendor or contractor, check their TIN to make sure you are entering correct information. This prevents 1099 form mismatches and protects the business from IRS penalties for incorrect reporting.
Before filing tax forms
Verify TINs before sending in any tax forms like W-2s or 1099s this prevents delays and penalties once tax time arrives.
When updating records
If a vendor or contractor contacts you regarding a change in name or TIN, verify updated information for compliance and recordkeeping purposes.
For backup withholding compliance
If you receive notification from the IRS of a TIN mismatch, verify the TIN immediately to ascertain if backup withholding applies. Changes made immediately help eliminate non-compliance.
Annually or periodically
Verify TINs periodically to keep your records updated. Regular checks can prove especially helpful for businesses with many vendors and contractors.
Before large transactions
When making substantial payments or engaging in transactions, validate the recipient’s TIN to ensure their authenticity and avoid reporting mistakes that might prompt audits or penalties.
When required by the IRS
A CP2100 or CP2100A notice from the IRS means you have a TIN mismatch in your filings. Mentally note down the relevant TINs and start verifying them at the earliest to resolve the issue and stop the penalties from rolling in.
Common TIN verification mistakes & how to avoid them
Incorrect name-TIN match
One of the most common mistakes is mismatching the name and TIN. For example, an incorrect spelling of a business name or transposing numbers in the TIN can cause errors in the verification process.
How to avoid: Always double-check the spelling of names and ensure that the TIN corresponds exactly to the individual or business name as registered with the IRS.
Failing to verify TINs for all contractors
Some businesses may forget to verify TINs for certain contractors or vendors, especially for smaller payments.
How to avoid: Ensure that TIN verification is a part of your standard process for all contractors, regardless of payment size, to prevent discrepancies when filing taxes.
Not using automated verification tools
Relying on manual verification or outdated methods can lead to human error, such as typos or overlooked discrepancies.
How to avoid: Use reliable, automated tools like EINsearch for TIN matching to ensure accurate and efficient verification. Automated systems reduce the risk of manual errors.
Delaying TIN verification
Waiting until the last minute to verify TINs, especially just before tax filing deadlines, can cause unnecessary stress and errors.
How to avoid: Verify TINs well in advance of tax season and perform regular checks throughout the year to keep your records current.
Ignoring IRS notices
Ignoring IRS notices about TIN mismatches can result in penalties and backup withholding requirements.
How to avoid: Take immediate action when receiving IRS notices, such as the CP2100 or CP2100A, and verify the mismatched TINs as soon as possible.
Choose EINsearch’s TIN matching service
EINsearch offers a reliable and efficient TIN matching service to help businesses ensure compliance with IRS regulations. With their automated platform, you can quickly verify the accuracy of TINs and names, reducing errors and avoiding penalties. EINSearch’s service streamlines the verification process, saving you time and effort while maintaining accurate records.
Whether you’re verifying a few or thousands of TINs, their system provides fast, accurate results, and helps ensure smooth tax filings. Trust EINsearch to manage your TIN matching needs and protect your business from costly mistakes and delays.