Collecting & Validating TINs

One of the most common unclean Vendor Master File culprits out there is the presence of incorrect or dummy Taxpayer Identification Numbers (TINs). When many of our clients deploy our DataShark Tool or engage our Recovery Audit Services, they are amazed at how many Vendor Master Files have been created using some form of a dummy or placeholder TIN. The versions vary but 99-9999999, 00-0000000, 11-1111111, NONE, CORP, INCCORP and EXEMPT are the most common.

A variety of things can occur when this critical and simple piece of information is not collected or entered incorrectly. The fallout is usually revealed most prominently during 1099 time. Imagine running year-end 1099’s and getting thousands of companies that all have the same TIN of 99-9999999. Then the flood of B-notices that may arrive later, creating thousands of hours in lost manpower, while you unravel and attempt to fix the errors. Not to mention the fines which accompany the B-Notices. Can you feel your hair turning gray just thinking about it?

Two things can drastically reduce the possibility of this unnecessary premature aging process. First, companies should require the collection of a TIN from any potential supplier, prior to doing business with them. There are only rare circumstances that would make this request impossible, so making it a requirement should easy to put in place. Making this information a part of a company-wide New Vendor Creation Form can ensure that all staff members are collecting the same information in the same way for all new suppliers. Unfortunately, while most ERP systems do have hard stop functionality that may require that the TIN field be filled in, many ERP systems do not recognize if that TIN is real, valid or just a series of numbers entered as a placeholder.

Our second recommendation will address that weakness in ERP systems. By implementing the use of the IRS TIN Matching Program, companies can proactively determine the validity and accuracy of TIN’s for their suppliers. Requiring this for any new vendors and then engaging in a routine database check will serve to make the year-end 1099 process much simpler. The IRS TIN Matching Program is a free service by which, once a company is registered, they can submit their data (either through an interactive screen for up to 25 TINs or via a .txt file upload which can accept up to 100,000 TINs) and the system will determine if the TIN is valid or if any exceptions are noted.

The greatest impediment to the TIN Matching Program is in the lead time required to get registered with the service. Because of that companies should be proactive by visiting the IRS.gov website and searching the term “TIN Matching” to find the instructions to register.

Very few endeavors have just two steps, yet also have such potential to save your organization a plethora wasted man-hours. Simply refuse to accept dummies in your organizations and you are well on your way to improved year-end business processes.

To know more, join Karl Andersson, CEO of Technology Insight in a series of webinars dedicated to Best Practices in Accounts Payable. Click here to view the list of upcoming webinars.

Leave a Reply

Your email address will not be published. Required fields are marked *

Prove You're Human * Time limit is exhausted. Please reload the CAPTCHA.