Many e-filing services provide TIN checking as an additional service to e-filing and paper filing. But what is the service? And is it necessary?
Many of our customers ask these questions when they use eFile360 to file their 1099s and related forms for the first time. Most customers want to be informed before they complete their order while others are suspicious of add-ons in general. So we wanted to clear the air: TIN checking isn’t necessary to file your 1099s, but this service can save you a lot of headaches.
What is a TIN?
A TIN is a Taxpayer Identification Number. It is also called a “95-number” or “tax-ID” number. A TIN is an umbrella term that means the following:
- Social Security Number (SSN)
- Employer Identification Number (EIN)
- Individual Taxpayer Identification Number (ITIN)
- Adoption Taxpayer Identification Number (ATIN)
- Preparer Tax Identification Number (PTIN)
Business owners typically use their EIN to file business taxes and their SSN to file their personal taxes, but this may differ based on your unique situation.
When it comes to filing 1099s, 1098s, ACA forms, and W-2s, business owners need to know the TIN for each employee, freelancer, and independent contractor that works for them.
Tip: While you may only need to file a form if you pay that employee or contractor $600 within a calendar year, it’s always best to document their TIN before they start working for you. This way, you know that you have their TIN on file way before tax season.
What is the TIN Error Reconciliation Process?
When it comes to tax reporting, it’s vital that all of the information you file is accurate – including the TINs of your employees and contractors.
This is where the TIN error reconciliation process comes into play. This process is three-fold:
- Check your records
- Use a TIN checking service
- File Form 1095-C when you find TIN errors
The first portion of this process involves you double-checking that the TINs on the forms you are filing match the TINs you have on record. Some business owners stop here and, if they do file an incorrect TIN, they scramble to get the correct TIN, file a correction, and may be subject to penalties from the IRS.
But you have another option. eFile360 offers a TIN checking service, also known as “TIN matching.” That way, if you do have an incorrect TIN, we will notify you before we file your forms. If that happens, you double-check the TINs on file again. If you mistyped the TIN, you can file a correction. If the error was not on your side, you can file Form 1095-C to inform the IRS that you know you have a TIN error but that you have “reasonable cause” for having the error. In this instance, you will not be penalized by the IRS for the error.
If you use a TIN checking service and we don’t find an error, then you know that your TINs are accurate.
For more information on fixing TIN errors, read this article.
Why is TIN Checking Important?
At this point, you may be wondering, Why is TIN checking important if I receive TINs from my employees and contractors at the beginning of our work relationship?
The reason behind this is more than flipping a coin to avoid a potential penalty from the IRS.
And the reason is simple: human error. Sometimes individuals remember their SSN incorrectly or confuse their EIN with another TIN they use. Sometimes they provide a fake TIN or misrepresent their legal name. Sometimes business owners or their accountants notate the number wrong.
Start Fixing TIN Errors and Avoid IRS Penalties
eFile360 provides a bulk TIN checking service. This means we match your payee names and TIN with the IRS’s records – before we file your forms.
Do you want to double-check your TINs? Learn more about our TIN checking add-on service.