As you probably know, accounts payable departments need to obtain taxpayer identification numbers (TINs) from vendors before paying them. TINs are identification numbers the IRS uses in the administration of tax laws, and are issued either by the Social Security Administration (SSA) or by the IRS, according to this article on the IRS’ website. However, vendors aren’t always diligent about providing their TINs or making sure that the ones they do submit are accurate. Even so, if your firm fails to provide the correct one on its tax returns, it risks receiving B-Notices. Here are several tips to help you avoid that:
– When selecting vendors though a competitive bid process, let candidates know that the contract award is contingent on your firm receiving taxpayer identification numbers from them.
– Ask vendors to include TINs on all invoices.
– Use the IRS’ “TIN Matching Program.” This web-based service allows authorized payers, or those entities that have filed information returns with the IRS in one of the two most recent tax years, to match 1099 payee information against the IRS’ records. What’s more, this can take place before an organization files its returns. The service matches the payee with the W-9 name and TIN with the IRS’ records. The payoff? Users of the system see a drop in backup withholding and penalty notices, as well as a reduction in the number of errors found during TIN validation, the IRS says.