Verifying taxpayer information is a crucial part of managing tax compliance. One of the most important tasks companies can undertake is TIN verification, an essential step in preventing expensive mistakes, IRS penalties, and other compliance challenges. Whether you’re filling out tax returns, issuing 1099 forms, or onboarding new vendors, validating TINs is a crucial step in saving time, mitigating risk, and ensuring compliance with federal requirements.
What Is TIN Matching Used For?
TIN matching is performed to confirm that the name and TIN (SSN for an individual, EIN for a business, or ITIN for an individual) provided match the IRS records. This process is highly recommended for compliance and best practices, and is therefore strongly recommended by the IRS for corporations:
- Tax returns
- Information returns (such as 1099s, W-2s, and 1098s)
- Other tax-related documents
The IRS requires accurate taxpayer information to ensure proper reporting and withholding. When a recipient’s name and Taxpayer Identification Number (TIN) do not match IRS records, it can lead to delays, rejected filings, backup withholding, and penalties.
Businesses use TIN matching to verify that the name and TIN provided by independent contractors or vendors are correct before submitting information returns such as Form 1099-NEC or 1099-MISC. This is especially critical when dealing with non-employees.
Submitting incorrect or unmatched TINs can result in:
• B Notices (CP2100/CP2100A) requiring you to notify the payee and obtain a corrected W-9
• P Notices (CP215), which are penalty notices issued by the IRS—up to $310 per incorrect return
• Mandatory backup withholding at 24%
• Risk of additional IRS scrutiny or audit
Using the IRS TIN Matching Program or trusted third-party services like TIN Comply helps businesses proactively prevent mismatches and reduce exposure to these costly outcomes.
Why TINValidate Matters for Compliance
Although TIN matching is a primary line of defense in compliance efforts, EIN lookups are as pivotal when it comes to verifying a business’s legitimacy. An EIN is a number issued by the IRS to identify a taxpayer’s business. Searching for an EIN can help you:
- Ensure Business Verification: You can validate an EIN to make certain you are working with an IRS-registered business. This will work to ensure your company doesn’t onboard fake or non-compliant firms.
- Support Anti-Fraud and AML Compliance: EIN lookup can be a crucial part in supporting Anti-Money Laundering (AML) compliance, particularly for Know Your Business (KYB) checks.
- Maintain Audit Readiness: Keeping validated EIN records ensures that your business is prepared for audits, providing a clear trail demonstrating due diligence in verifying vendors, subcontractors and suppliers.
- Streamline Vendor Management: Regular EIN lookups can help maintain accurate vendor records, expedite the onboarding process, and enhance overall efficiency in managing third-party relationships.
EIN lookups and TIN matching serve different yet complementary purposes in the verification process. Depending on your compliance needs, you might use one or the other at various stages – EIN searches help to confirm a business’s existence, whereas TIN matching verifies that the name and tax ID combination matches IRS records.
Common TIN Issues
Even the most well-run companies can run into TIN errors. They may look small, but left unaddressed, they can carry heavy compliance and financial responsibilities. Some of the standard TIN rejection issues are:
1. Name/TIN Mismatch
This is the most common reason for IRS TIN matching failures. If the legal name and TIN combination you provide doesn’t exactly match IRS records, your submission may result in a failed match and could trigger B Notices (CP2100/CP2100A). These require you to correct the mismatch or begin backup withholding. Name/TIN mismatches often happen when businesses submit a “doing business as” (DBA) name instead of the legal business name, or due to simple typos during manual entry.
2. Incorrect TIN Format or Formatting Errors
TINs must follow IRS-prescribed formats. Social Security Numbers (SSNs) must appear as XXX-XX-XXXX, and Employer Identification Numbers (EINs) as XX-XXXXXXX. Submitting a TIN without proper formatting (e.g., missing dashes, non-numeric characters, or too many/few digits) can lead to automatic system rejections or matching failures
3. Missing Information
Omitting critical details such as the full legal name, suffix (e.g., Jr., Sr.), or entity type (e.g., LLC, Corp.) can cause TIN matching to fail. Incomplete records increase your risk of receiving B Notices, and may also lead to P Notices (CP215)—IRS penalty notices for filing incorrect information, with potential fines of up to $310 per incorrect return.
Automated TIN matching solutions can help avoid these costly errors by validating formatting, flagging mismatches in real time, and reducing the risk of IRS penalties and compliance violations.
Potential Penalties for Inaccurate Information
Not properly validating TINs isn’t merely an inconvenience; it’s expensive. If the IRS discovers that you’ve filed forms with incorrect TINs or names that do not match, and you do not provide the required information later on, you may be subject to penalties.
Under the latest IRS guidelines, businesses can be penalized up to $310 per incorrect information return that is not corrected, depending upon when it is corrected. For enterprises that submit hundreds or thousands of forms, the penalties can quickly add up to total tens of thousands or more.
In addition to fines, there’s the risk of:
- Penalties for failure to withhold or pay backup withholding.
- Refunds being delayed or tax returns being filed late
- Heightened audit risk, particularly for repeating recurring errors over several returns
When TIN errors occur, it not only makes your organization look bad from a data management perspective, but it can also damage your organization’s and vendors/states’ relationships with vendors, partners, and the IRS.
Using TINValidation to Keep Your Business Compliant With IRS Regulations
Our TIN matching is more than a technical necessity; it’s a vital component of staying compliant with regulations, maintaining the trust of your vendors and customers, and ensuring that your tax reporting processes run smoothly.
Here’s how TINvalidation can help you remain compliant:
- Fast Verification: Their products enable live or batch pre-screening of TIN and name matches, which can catch errors before tax forms are submitted.
- Tamper-Proof Processing: Designed with Real-time processing and API capabilities in mind, TINvalidation provides secure solutions that ensure sensitive information is safeguarded.
- Automatic Updates and Notifications: Receive updates on invalid TINs or IRS changes to their records to help you avoid compliance problems.
By building TIN validation directly into your onboarding, vendor management, or tax preparation systems, you can prevent costly mistakes, simplify your tax processes, and ensure compliance with IRS requirements at all times.
In Summary
TIN verification is not an end in itself; it forms the foundation of responsible tax and financial management. Whether you’re engaging a freelancer, onboarding a vendor, or preparing year-end tax forms, verifying TINs is always essential.
Since the IRS imposes penalties of up to $310 per incorrect filing and audits can occur at any time, businesses must be proactive in ensuring compliance. With services like TIN Matching and Bulk TIN Matching offered by TINvalidation.com, you can keep your TIN and EIN data accurate and up to date—helping you avoid costly fines, penalties, and IRS notices.
Don’t wait to hear from the IRS. Take control of your compliance now by verifying TINs, validating EINs, and making your business compliance ready year-around.
