Tax Solutions: SME Corner Series: Streamlined Compliance with Real-Time Taxpayer Identification Number (TIN) Matching

Preparing for the Digital Age at the IRS…because it's here.

The Inflation Reduction Act of 2021 provided the Internal Revenue Service (IRS) with $80M of funding for technology and enforcement. The IRS has deployed some of that capital into technology initiatives to help aid in enforcement and streamline taxpayer submission processes. Over the last few years, the IRS has put mechanisms in place to improve data quality, quickly identify errors in submission, and enable the industry to perform reconciliations on their reportable data prior to e-filing submissions. While the IRS appears to be looking for ways to ensure better data quality and improve user experience and tax compliance, is the data being provided being used for analytics to inform and influence its enforcement agenda?

In this 3 part blog series, we discuss initiatives implemented by the IRS and how organizations can leverage the S&P Global Market Intelligence (SPGMI) End-to-End Tax Solutions to improve operational preparedness and risk management around their information reporting and withholding processes.

Blog 1: Streamlined Compliance with Real-Time Taxpayer Identification Number (TIN) Matching

The IRS offers a web-based TIN matching service through its e-Services for withholding agents and payors making payments subject to back-up withholding provisions under Section 3406 of the Internal Revenue Code (IRC). The TIN matching service uses a name and TIN to verify the information against the Social Security Administration (SSA) Database. However, entry barriers have hindered its adoption. In addition, the credentialing process for TIN matching is tied to an approved individual which is the subject of credit checks and fingerprinting, creating key man risk for function owning this process.

Although TIN matching has never been required by the IRS, it has been recognized as a best practice for organizations aiming to minimize penalty notices (CP2100 in particular), reduce backup withholding risk and, enhance control. This applies not only to financial payments but also to vendor payments made by multinational corporations (MNCs) and other non-financial organizations facing significant risk within the Accounts Payable/Vendor Payment space.

Legislative Changes and Impending Thresholds: Recent regulatory changes such as IRC § 6050W highlight the importance of TIN matching for all MNCs. Additionally, the future of digital asset proceeds reporting will bring in large populations of payees previously exempt from providing a certified Form W-9. With impending threshold changes for goods and services payments, now is the ideal time to shore up onboarding procedures. This will help ensure TINs are collected and validated in anticipation of the additional volumes of Form 1099 reporting for industries not used to high volumes of information reporting.

SPGMI's Real-Time TIN Matching Solution: SPGMI offers real-time TIN matching through APIs enabling seamless integration into the IRS/SSA due diligence tax form validation processes. Our service can also be used as a standalone service for remediation and caters to a wide range of industries including:

• MNCs issuing vendor payments and payments of non-employee compensation.
• Merchant Acquiring Entities and Third-Party Settlement Organizations making payments for goods and services.
• Financial Institutions offering consumer lending and credit cards; and,
• Digital Asset Brokers and Exchanges paying proceeds, dividends, interest, original issue discount and miscellaneous income.

Conclusion:

The S&P Global Market Intelligence real-time TIN matching service empowers organizations to streamline compliance, reduce risk, and enhance control over tax form validation processes. Stay ahead of regulatory changes, minimize penalties, and ensure accurate reporting with our comprehensive solution.

Learn more about our Tax Solutions and how our team of experts can help your organization achieve seamless TIN matching.

Stay tuned for the next in this three-part blog series:

Blog 2: The Future of Tax Filing: Embracing Modernized e-Filing

Blog 3: Streamline Tax Reporting with SPGMI's Reconciliation Tool

S&P Global provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.