Tax & Accounting Blog

Form 1099 Backup Withholding and the IRS TIN Matching Service

ONESOURCE, Tax Information Reporting, Trust Tax June 9, 2011

If a vendor’s name and Tax ID Number (TIN) are run through the IRS TIN Matching Program and are not a match, do you have to start backup withholding? That’s a question we are sometimes asked by customers we are assisting with bulk submissions to the IRS TIN Matching Program. The IRS TIN Matching Program lets you spot invalid Name-TIN combinations and avoid IRS B Notices and penalties.

In fact, backup withholding is not permitted on the basis of TIN Matching Program results.  The tax regulations authorizing the IRS TIN Matching Program state, “No matching details received by a payor through a matching program will constitute a notice regarding an incorrect name/TIN combination under Sec. 31.3406(d)-5(c) for purposes of imposing backup withholding under section 3406(a)(1)(B).”  [CFR section 31.3406(j)-1(b)]   

The regulatory section cited is the one dealing with B-Notice backup withholding, where the federal backup withholding rules require you to withhold 28% of payments to persons that have been the subject of a B Notice sent to you by the IRS, and the person has not furnished the requisite new documentation to you by the B-Notice deadline. 

But a TIN Matching Program mismatch result does not trigger backup withholding. Instead, use the results the Program returns as an alert for payees whom you may want to contact to solicit a new Form W-9 that might contain new information that would match IRS or SSA files. 

Remember that the TIN Matching Program currently has the following restrictions:  It is for use by payers that make payments reportable on Forms 1099-B, 1099-DIV, 1099-INT, 1099-MISC, 1099-OID or 1099-PATR; and, Name-TIN combinations submitted to the TIN Matching Program should be those of payees to whom a reportable payment has been made or is anticipated to be made.