What is a TIN and How Does IRS TIN Matching Work?

TIN matching is a vital compliance measure to take to avoid getting caught in the hassle of legal procedures. TIN matching allows authorized individuals to match people’s provided tax information against IRS records. TIN matching ensures that the companies or individuals you associate with are on the right side of the law and are tax-compliant. 

What is a TIN?

The Internal Revenue Service or Social Security Administration issues a Taxpayer Identification Number to use when filing federal tax returns or for other financial situations. Checking compliance of vendors or individuals you work with can also be done using the TIN number. A Taxpayer Identification Number comes in various types depending on the individual. 

Types of TIN

The TIN of an individual or organization depends on the type of residence, organization, and other factors. Here are some types of TINs:

SSN (Social Security Number)

An SSN is a 9-digit number issued to an individual citizen of the United States of America. The number has three parts: the first three are called the area number, the next two are called the group number, and the last four are called the serial number. The Social Security Administration issues this number to every citizen of the United States with their social security card. 

Freelancers or individuals in sole proprietorship can also use this number as their TIN for tax purposes. This is an accepted form of identification for filing your U.S. federal taxes. 

ITIN (Individual Taxpayer Identification Number) 

An Individual Taxpayer Identification Number is allotted to individuals who are liable to pay taxes to the U.S. government but don’t qualify for a Social Security number. It is also a 9-digit number formatted like an SSN but begins with a 9. Certain nonresidents of the USA or resident immigrants file their taxes using the ITIN. 

Individuals can apply for an ITIN in person or by mail by filling out the W-7 form and providing additional identity documents.

EIN (Employer Identification Number)

An Employer Identification Number or a Federal Tax Identification Number is issued to business entities for identification purposes for reporting taxes. It is a 9-digit number split into the first two digits and the last seven digits. EINs are used by the IRS to identify businesses. 

If your company has employees, pays taxes, or withholds income for taxes, you need to apply for an EIN directly from the IRS. 

ATIN (Adoption Taxpayer Identification Number) 

An Adoption Taxpayer Identification number is given as a temporary number to a child in the process of adoption who may not have an SSN or might not have access to it. The ATIN is used by the parents if they need to declare the adopted child as a dependent while paying taxes or want to claim childcare credits. This can be claimed when the adoption is domestic or the child in question has a permanent certification of citizenship. 

PTIN (Preparer Taxpayer Identification Number)

All paid tax return preparers must use the Preparer Taxpayer Identification Number on refund claims or to prepare U.S. federal tax returns. 

What is IRS TIN matching?

TIN matching is a process in which an authorized payee can match 1099 information with that present with the IRS. Businesses need to provide payee 1099 information to show the amount of taxes they withhold. Performing TIN matching before filing taxes can help you avoid IRS tax notices and related penalties. This can also save you from many compliance issues due to non-adherence to tax regulations.

TIN matching from the official IRS website will let you match 25 TINs simultaneously with interactive TIN matching and 100,000 TINs at a time with bulk TIN matching. 

Best practices of IRS TIN matching

Like any other process, you must follow some best practices to avoid legal issues while filing taxes. Here are a few of the best rules to follow while matching TINs:

Ask for the W-9 form while onboarding the vendor

To avoid any tax issues later on, make it a point to request your vendors for their W-9 forms before onboarding them onto your system. This will ensure that you complete your TIN matching process before filing your taxes and nip any non-tax-compliant relationship before you purchase from them. 

This also helps you avoid the hassle of collecting TINs before the tax season, which might lead to delays in paying taxes. 

Start business only after TIN verification is completed

Completing TIN verification before purchasing goods from your vendor ensures you have the correct information while paying or withholding taxes. 

Ensure you don’t pay or purchase supplies from your vendor before completing the TIN verification process. 

Reverify TINs before paying taxes

Even if you diligently follow the steps mentioned above, there’s a chance a few TIN checks might have been missed in the verification process. Reverifying your TINs before tax season might inform you of recent developments in the vendor’s tax compliance behavior. 

Store all data securely 

Ensuring that your systems are securely encrypted is also essential when tax compliance is in question. Protecting sensitive tax data like SSNs or ITINs can ensure you are not the victim or cause of the leakage of someone’s sensitive data. This will protect your company’s reputation against harm and potential legal issues. 

Duly note all tax details

Make it a point to manage and store your vendors’ tax details in a secure and organized location. This will ensure you have this information handy when required and prevent any delays in government procedures. 

Immediately handle wrong TINs

If you notice a wrong TIN provided by your vendor or customer, immediately raise this issue to the concerned individual and request the correct data. Make sure to follow up with vendors regularly and verify the accurate TIN information at once when received from the vendor later. 

Role of automation in TIN matching

Automating your finances can prove highly beneficial to ensure correct TIN matching and tax compliance. With AP automation vendors allowing you to store vendor W-9s with all other vendor documents in your software, you can provide safe and secure management of sensitive information. Automating cumbersome processes like TIN matching can also help ease your accountant’s workload and ensure your TIN verification is complete before onboarding the vendor. Software like ClearTech also doesn’t let you onboard vendors without proper approval from a business head, avoiding fraud and onboarding before TIN validation. With ClearTech, you can also identify duplicate vendors in your vendor master and rectify duplicity issues before they become problematic. 

In conclusion

TIN or Taxpayer Identification Number matching is critical to check whether your payees or payers comply with U.S. government tax regulations. A TIN is a 9-digit unique identification number used to identify individuals or businesses by the IRS. For individuals residing in the U.S., the social security number acts as a TIN. Companies that report taxes or employ individuals must get an Employer Identification Number or EIN from the IRS. Nonresidents of the U.S. who are liable to pay taxes but can’t obtain an SSN need an Individual Taxpayer Identification Number from the IRS to file taxes. Other TINs include the ATIN or Adoption Taxpayer Identification Number or the PTIN or Preparer Taxpayer Identification Number.

TIN matching is a vital compliance process and should be performed before filing or reporting taxes. Verifying a vendor’s TIN before onboarding and making purchases from them is essential. Store data like SSNs securely to ensure hackers don’t get access to someone’s sensitive information. Handle incorrect TINs and store all vendor tax information in a handy location to avoid unnecessary hassle before filing taxes. Implementing automation is also beneficial for TIN verification, especially since it ensures no vendor is onboarded or paid before their TINs are verified. Automating TIN matching can also remove the burden of tedious manual tasks from your accountants. 

FAQs

• How do I match my TIN with the IRS?

You can match TIN with the IRS through their Online Taxpayer Identification Number matching program. With interactive TIN matching, this program allows you to match TINs in a group of 25 at a time up to 999 within a 24-hour period or use bulk matching to match up to 100,000 TINs at a time and receive results within 24 hours.

• Is TIN matching required?

TIN matching is not mandatory; however, verifying the validity of TIN numbers is essential to avoid any legal issues or tax notices from the IRS. 

• What is a TIN match?

The TIN match is a process by which you can verify the TIN details of an individual you’re professionally associated with to verify validity and compliance. 

• How do I set up TIN matching?

You can set up TIN matching by searching for ‘e-services’ on the IRS website. You will find TIN matching under ‘e-services application’ section.