Tax & Accounting Blog

One man’s quest to solve the IRS TIN Matching System mystery

1099, Blog, ONESOURCE, Tax Information Reporting October 27, 2015

It’s that time of year when we receive CP2100 Notices from the IRS and then have to generate B-Notices. Yes. It’s the time when we reach out to our mismatched clients to try and save them from the evils of backup withholding.

The IRS TIN Matching System is a Web-based, user-driven research tool designed to assist filers of certain 1099 income with perfecting their payee Form W-9 data. Seems clear enough, but there has long been a great mystery around TIN Matching. If you are a filer and perform TIN matching to determine how many recipient names/TINs are good or bad, you know how complicated or confusing it can be.

In my prior position, I managed millions of IRS Form 1099-K documents. Failure to provide a correct Name/Tax Identification Number (TIN) could land the recipient a CP2100 Notice and ultimately the dreaded B-Notice. To go even a step further, if the filer failed to respond in a timely manner, they went on backup withholding. So if you are a filer you naturally want to do everything you can to ensure that all of your Names/TINs on file are correct. Putting a customer on backup withholding doesn’t make for an exceptional customer experience!

Now back to the mystery. Many filers run their client base through the IRS TIN Matching System to flag mismatched accounts. They then contact the recipient to get the proper information. I can’t tell you how many times we called a recipient to hear that they were adamant that the information they provided was correct. We printed the IRS screen shot showing that there was a mismatch. The client would then call the IRS for Letter 147C to prove that their name and TIN were correct. We took the information off of the letter and entered it into the IRS TIN Matching System and guess what? Mismatch! How can that be? I would then inform the client that they had to contact the IRS and work with them. The IRS then entered the name and TIN into their system and, of course, it would work and the IRS would advise the taxpayer that their “vendor” must have made a mistake.

After experiencing this scenario multiple times, I did some testing on my own. I started asking the client to conference me in with the IRS. We talked through it and ultimately the IRS saw my concern and sent us to Level 2 Support. It is here that I found that they have multiple TIN system databases and each one is independent and not replicated with the other. We would eventually get it resolved, but the issue was always on the IRS end.

At the time, the IRS Form 1099-K was relatively new and I had not seen CP2100 Notices yet, but heard that if you have 100,000 mismatches, you will see a fraction of them on the CP2100. That confused me. Why go through all of the work to get updated information when the IRS only reports a fraction of them on the CP2100? I asked other companies if they had similar results. They acknowledged that the CP2100 was never as bad as what they got when they ran the names/TINs through the IRS TIN Matching System. It was one of those things that many accepted as “it’s always been like that” and that bothered me. I continued to research and test ideas to find a solution.

In 2014, I was appointed to the Information Reporting Program Advisory Committee (IRPAC) and added TIN Matching to the agenda. I then authored an issue to present to the IRS. The issue was validated and the IRS allocated resources and fixed the problem. Excellent news! On November 2, the IRS will implement the changes and moving forward it will be “what you see is what you get” instead of “well, that’s the way it’s always been.” Now, when you run names/TINs through the TIN Matching System, you will only get actual mismatches that are the same as the CP2100 Notices.

I am really pleased that the IRS put up with my nagging and was able to find a fix. This will certainly help clean up data, but there is a downside to this story. With a November 2 just around the corner, the CP2100 Notices fall under the old way of doing things. . The upside is that after November 2, your TIN matching results will be accurate and you will know what to expect in 2016.

The fix may not help this year, but hopefully it helps filers in 2016 and makes CP2100 reports more predictable. It also proves that if you have an issue and are persistent and can back it up with evidence, you can make a difference. Maybe now I should look into lost emails?!