The IRS has been processing Forms 1099 all summer, and it is time for the TIN Matching Notices to come fast and furiously. Have you received one? Do you know what they are? A TIN (Taxpayer Identification Number) Matching notice means that the IRS was unable to match the recipient TIN provided on a Form 1099 with their records. There are multiple reasons for the mismatch. Here we will look at the two most common reasons and what response is required.
In order to determine the proper response you first need to know if the information reported to the IRS matches your files. Did the Form 1099 information have the same TIN as your files or was there an error made on the 1099?
If there was simply an error on the 1099 when it was completed then there is no further action to take with the IRS or the vendor. Be sure that you make a note for the following year, or modify your accounting system, so the correct information is reported in the future. If the information you reported on the 1099 matches the information provided by the vendor then you are required to take further action.
What to do if you need to respond to a TIN Matching notice when the vendor has provided incorrect information…
- Within 15 days from the date of the TIN Matching notice, a First “B” Notice has to be sent to the vendor to notify them of the backup withholding requirements and response due date along with a Form W-9 for them to complete, sign and return.
- The response due date must be no later than 30 business days from the date of the TIN Matching notice.
- Begin backup withholding at a rate of twenty-eight percent (28%) on all payments made to the vendor if a completed Form W-9 is not received by the response due date in the B Notice (or immediately upon receiving the TIN Matching Notice if desired.)
- Once the completed Form W-9 is received, the backup withholding requirement ceases. Stop backup withholding no later than thirty (30) calendar days after receiving the signed Form W-9. All backup withholding funds collected are to be remitted to the IRS. They cannot be refunded to the vendor.
- The outside of the envelope in which you send the documents to the vendor must be clearly marked “IMPORTANT TAX INFORMATION ENCLOSED” or “IMPORTANT TAX RETURN DOCUMENT ENCLOSED.”
Note that you should NOT file a corrected 1099 with the IRS for a TIN Matching error. Also, note that you are responsible for sending the official B Notice and obtaining a signed Form W-9. The information can no longer be obtained by telephone.
Be sure that you follow the B Notice steps even if you no longer use that vendor. Should your company undergo a 1099 audit at some point it will be important to show that you have best practices in place for obtaining accurate information.
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