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The Internal Revenue Service should consider providing additional guidance to advisors to help curb missing or incorrect taxpayer identification numbers on Form 1099-MISC, according to a report from the 2009 Information Reporting Program Advisory Committee. The committee's report, which covered a large number of issues, said that there about 2 million payees that had the problem in the last filing year. And IRPAC said the IRS should immediately issue guidance permitting payers to mask all but the last four numbers of TINs on payee statements

The committee said the IRS should provide more advice to small business payers and their software providers about collecting TINs as well as about filing requirements for the form. The 31-member advisory body, chaired by Jon Lakritz, reported the IRS sent 21,000 letters to payers about incorrect or missing TINs, along with 50,000 to 65,000 proposed penalty notices.

The problem likely stems from the fact that the forms are often issue only once by small businesses that are often  knowledgeable about TINs and filing rules. They generally don’t have back-office staffs and issue few 1099-MISCs. The report also found many service providers are sole proprietors using a business name but filing returns under the person's legal name and using a Social Security Number as a TIN. If that individual provides a payor with an SSN and the name of the business, a mismatch is created.  

The committee's recommendation on masking TINs on payee statements has been complicated by a report that the Office of Privacy, Information Protection, and Data Security that instead of issuing guidance it submitted a priority guidance proposal for 2009-2010 requesting a Revenue Procedure containing a penalty waiver for payers who mask TINs on certain information returns, primarily 1099s. The IRPAC report said the timing of any guidance is unknown. The advisory committees have been urging action on option TIN masking and this year IRPAC asked for swift and decisive action.

The IRPAC report said the industry needs immediate guidance to be permitted to mask TINs for tax year 2009. It also noted the proposed waiver applies only to 1099, but not other information returns such as Forms 1098 and 5498. It also called the penalty waiver and indirect, temporary mechanism, and not one that addresses the problem completely.

Among other recommendations, the committee urges the IRS expand access to e-Service incentive provides to business entities and affiliated companies that file on their own behalf and entities that file information returns on their own with a Reporting Agent relationship. The IRPAC also ask the service to investigate the feasibility of electronic submission of Powers of Attorney when tax returns are filed.

Last modified on Sunday, 02 June 2013
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