Verifying Taxpayer Identification Numbers (TINs) and Social Security Numbers (SSNs) is a foundational step for accurate reporting and risk management. Before year-end, it is essential to ensure all identifiers are correct for your employees, vendors, and contractors to avoid potential penalties, backup withholding requirements, and operational disruptions.
This guide will strengthen your compliance with a deep dive into the TIN and SSN verification process.
The Importance of TIN and SSN Verification
Accurate TIN and SSN verification is vital for successful year-end reporting and compliance. It plays a key role when preparing forms such as the 1099 series for independent contractors and vendors, as well as the W-2 for employees. Ensuring that these identifiers are correct reduces risk for both your business and your payees.
Types of Taxpayer Identification Numbers
- Social Security Number (SSN): Used for individual tax reporting, work authorization, and government benefits
- Employer Identification Number (EIN): Identifies businesses for federal tax purposes
- Individual Taxpayer Identification Number (ITIN): Issued to certain nonresident and resident aliens, their spouses, and dependents who cannot obtain an SSN
For more details, see IRS: Taxpayer Identification Numbers.
Consequences of Incorrect TINs
Providing correct TINs and SSNs benefits employees, vendors, and contractors by supporting smooth and timely year-end filing. Inaccurate data introduces several risks:
Incorrect TINs on 1099 Forms
- A valid TIN must be provided as soon as an entity receives payments reportable on Form 1099 (and Form W-2G, where applicable).
- Mismatched or missing TINs often result in an IRS-issued "B-Notice," which requires you to obtain and submit the correct information promptly.
- Failure to resolve discrepancies leads to mandatory backup withholding, where you must withhold 24% of eligible payments and remit them to the IRS.
- Repeated issues or unresolved mismatches may result in significant penalties and increased scrutiny.
For additional information, review the IRS: Backup Withholding B Program.
Incorrect SSNs on W-2 Forms
- During hiring, employees must provide their SSN to the employer.
- Incorrect or missing SSNs at year-end can delay tax return processing, impact refund timing, and affect the employee’s Social Security earnings record.
Verifying TINs and SSNs prior to filing demonstrates due diligence and protects all parties from avoidable errors, notices, and withheld payments.
Penalties to the Business
Accurate TIN/SSN verification is essential to avoid costly IRS penalties. Penalties for information returns with incorrect or missing TINs are:
- $60 per return if corrected within 30 days
- $130 per return if corrected after 30 days but before August 1
- $340 per return if the error is not corrected by August 1
Intentional disregard of filing requirements can result in penalties of $680 per return or more, with no maximum cap. For larger organizations, these fines can quickly escalate into tens of thousands of dollars. See IRS: Information Return Penalties for current details.
Taking proactive steps to verify TINs and SSNs is an effective way to reduce your organization’s risk and support efficient, accurate year-end reporting.
Step-by-Step: TIN/SSN Verification Process
A methodical approach ensures compliance and reduces end-of-year strain. The following steps offer a clear path for both TIN and SSN verification using official IRS and SSA resources.
Step 1: Collect and Document Data
For Vendors and Contractors:
- Use IRS Form W-9 to capture the payee's legal name, correct TIN (SSN, EIN, or ITIN), and a certified signature
- Make W-9 collection a mandatory part of onboarding before issuing any payment to minimize year-end filing delays
For Employees:
- Use IRS Form W-4 and USCIS Form I-9 to collect and verify Social Security Numbers (SSNs)
- Ensure employees provide their legal name exactly as it appears on their Social Security card to prevent mismatch notifications from the SSA
For further reading: The Complete Guide to I-9 & E-Verify
Step 2: Register for Verification Services
TIN Matching
- Register for IRS e-Services. Registration requires an individual me account, which verifies your identity through:
- Self-service upload of government-issued photo ID and a selfie
- Or live video call with an ID.me agent (no biometric data required)
- Refer to the IRS e-Services TIN Matching Application (PDF) for instructions
- me accounts are for individuals. Access for a business is granted once the user is authorized within IRS e-Services
- Complete the TIN Matching application and be added as an authorized user
SSN Verification
- Register via SSA Business Services Online (BSO), using either Login.gov or ID.me
- After credentialing, request access to the Social Security Number Verification Service (SSNVS)
- An activation code will be mailed to your employer. Enter this code to activate your SSNVS access
Step 3: Use Official Matching Platforms
TIN Matching
Once your account is active:
- Access the IRS TIN Matching Tool
- Utilize Interactive TIN Matching to verify up to 25 name/TIN pairs at a time, suitable for new or small batch verifications
- For high volumes, use Bulk TIN Matching to upload files of up to 100,000 name/TIN combinations—results are generally returned in 24 hours
- The system provides a code for each entry—follow up immediately on any mismatches
SSN Matching: Social Security Number Verification Service (SSNVS)
- Offered through SSA's BSO, the SSNVS system allows verification of names and SSNs prior to filing Forms W-2
- Employers may:
- Verify up to 10 names/SSNs instantly through an online form—ideal for new hires
- Upload files containing up to 250,000 SSNs, with results typically available the following business day—useful for payroll database reviews
- SSNVS is exclusively for current and former employees to ensure records are correct for W-2 reporting
For more information, check out SSA: Social Security Number Verification
Best Practices to Streamline Year-End TIN and SSN Verification
Strong verification policies minimize year-end challenges and reduce compliance risk. Implement the following practices:
- Standardize Information Collection: Require a completed, signed W-4 for every employee and a W-9 for every vendor or contractor before processing payments. Consider integrating digital collection tools to automate requests and storage.
- Year-Round SSN/TIN Verification: Verify identifiers as you onboard new employees and vendors. Consistent, incremental verification reduces the year-end workload and addresses discrepancies as they arise.
- Prompt Communication: Address mismatches quickly. If a verification check fails, notify the employee or contractor, explain the issue, and request an updated W-4 or W-9.
- Maintain Organized Records: Document all verification activities. Retain copies of W-4s and W-9s, and log all actions—including dates, system outputs, and related correspondence. Good recordkeeping demonstrates due diligence during any IRS review.
How Greenshades Supports Year-End Verification
TIN and SSN verification is a vital step in the year-end process. Greenshades simplifies this task by integrating it directly into the Year-End Forms wizard.
The process involves these steps:
- Upload your data and start the verification process
- Receive results within three business days
- Follow up on any TINs or SSNs flagged as invalid and update records as needed
Generally, the portal opens for data verification in December of each tax year. Once available, you can verify TINs for 1099s and SSNs for W-2s and 1095s. Integrating verification into your workflow helps prevent last-minute issues, streamlines compliance, and reduces administrative tasks as you close out the year.
Secure Your Organization for a Smooth Tax Season
TIN and SSN verification is a critical part of year-end compliance and should be integrated into routine processes. By leveraging IRS and SSA resources, establishing strong data collection and verification practices, and using tools like Greenshades to automate key steps, you ensure your organization avoids costly errors and penalties.
Review your procedures now, close gaps, and position your business for a smooth and compliant tax season.
