Why TINs Don’t Match IRS Records — and How to Fix It

Taxpayer Identification Number (TIN) mismatches have quietly become one of the most expensive and disruptive compliance problems facing accounts payable (AP) and tax teams. As IRS penalty tiers rise and backup withholding rules tighten, even small errors like using DBAs instead of legal names, SSN/EIN mix-ups, stale vendor records, and sloppy onboarding can trigger B-Notices, delayed payments, and a cascade of manual remediation. 

Most organizations don’t realize how quickly these issues accumulate until 1099 season hits. Understanding where mismatches originate and how to prevent them upstream is now essential to controlling cost and risk. Teams are increasingly turning to tools like Sovos TINCheck to catch these errors early and keep filings clean.

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Common causes of TIN or name errors

In most organizations, TIN and name mismatches often stem from everyday data-quality gaps, misunderstandings of IRS rules, or inconsistent vendor-management practices. These issues tend to cluster into several predictable categories, each with its own operational risks. Let’s break down the most common failure points and why they continue to trip up even mature AP and vendor-management teams.

Legal name vs. “doing business as” (DBA)

A major driver of mismatches is the confusion between a vendors’ legal names and the names they use in everyday business. Vendors frequently list a DBA on their W-9, assuming it represents their identity for tax purposes. AP staff, especially when onboarding is rushed, may then enter this DBA into the legal-name field tied directly to the TIN. Because IRS validation relies strictly on the legal name associated with the SSN or EIN, the name/TIN pairing fails.

This issue is amplified among sole proprietors and micro-businesses — contractors, consultants, tradespeople — who often operate under brand names while the IRS still recognizes either their personal legal name or a formal entity name that never appears in correspondence.

Misinterpreted W-9 instructions

Many errors begin at the source: vendors themselves. W-9 instructions are not always intuitive, and many small-business owners are unfamiliar with the distinctions between tax classifications. Selecting the wrong classification box, misunderstanding the requirement to match the legal name exactly, or misunderstanding whether they should use an SSN or EIN can all result in invalid combinations.

Foreign vendors often compound the issue by submitting a W-9 instead of a W-8 form, producing identity data that does not align with U.S. tax reporting requirements. AP teams frequently accept these forms at face value without verifying whether the provided information is logically coherent.

SSN vs. EIN confusion

Many small-business operators do not fully understand whether their business activity should be reported under an SSN or an EIN. As a result, a sole proprietor may provide an SSN even though they obtained an EIN when they registered their business. Conversely, some individuals assume that using an EIN avoids identity exposure and provide it even when the payer is required to report under the individual’s SSN.

AP teams can inadvertently introduce additional mistakes when manually transferring W-9 data. When SSN and EIN fields are reversed or misinterpreted, the system appears to have complete information, but the IRS will still reject the name/TIN combination.

Spelling, formatting, and data entry errors

Even in mature finance organizations, basic data-entry issues remain a persistent risk. TIN fields are highly sensitive to errors — a single transposed digit, missing number, or extra zero can cause immediate IRS rejection. Names are similarly vulnerable because extra punctuation, nicknames, omitted middle initials, or added suffixes can disrupt the precise formatting IRS systems expect.

Manual workflows increase exposure. Every time a W-9 is emailed, printed, or retyped into an ERP, the probability of formatting inconsistencies grows. These small deviations accumulate across a large vendor population, producing preventable mismatches during 1099 season.

IRS name-matching nuances

IRS name-matching algorithms operate with strict logic that often differs from human expectations. For individual taxpayers, the IRS places heavy emphasis on the first part of the last name and the first initial of the first name. Hyphenated names, multi-part surnames, or cultural naming conventions can cause misalignment if entered differently than the IRS record.

Entity names follow similarly rigid rules. The legal name must match exactly what appears on the EIN assignment notice. Even small changes — removing “LLC,” reordering words, abbreviating terms, or dropping punctuation — can break the match. Organizations sometimes introduce errors when they attempt to “clean up” or simplify vendor names for display purposes, inadvertently creating a mismatch with IRS records.

Outdated vendor information and business changes

Vendor data rarely stays static. Businesses change names due to mergers, acquisitions, ownership transfers or rebranding. Sole proprietors form LLCs, LLCs elect S-corp status, and partnerships convert into corporations, all of which may require new EINs. If vendors do not proactively provide updated W-9s, AP teams may continue using outdated identity information for years.

Longstanding vendors often reflect legacy naming conventions or incomplete data captured during initial setup. These older records can survive multiple system migrations or organizational changes before finally surfacing as mismatches during IRS reporting cycles.

Multiple names for the same person or entity

Identity fluidity creates another set of mismatches. Individuals may change their legal names due to marriage, divorce, citizenship adjustments, or personal preferences. Vendors may alternate between using a personal name and an entity name, depending on the engagement or invoice. Without a regular reconciliation process, AP may create duplicate vendor profiles with slightly different names or mix data between them.

These inconsistencies lead to conflicting name or TIN combinations and increase the likelihood that IRS systems will flag the incorrect pairing during matching.

Poor vendor onboarding processes

Weak onboarding processes almost guarantee downstream reporting issues. When W-9s are collected via email, shared drives, spreadsheets, or unstructured portals, it becomes difficult to maintain consistency in how names and TINs are captured. AP staff often key information directly from whatever is provided, even if it contains formatting issues or mismatches.

Organizations without standardized naming conventions or built-in data validation rely too heavily on manual review. During peak periods such as year-end vendor onboarding or seasonal hiring, accuracy often takes a back seat to processing speed, increasing error rates across the vendor base.

System and integration issues

Technology transitions introduce their own identity risks. ERP migrations may truncate name fields, drop suffixes, or mis-map TIN attributes entirely. Integrations between procurement, HR, and AP platforms may pass only partial identity data, resulting in incomplete or inconsistent name/TIN pairs reaching the tax reporting system.

When vendor master systems lack validation rules —such as numeric checks on TIN fields or formatting checks for legal names — invalid data may enter t he system and remain undetected until IRS reporting deadlines approach.

Human behavior and workarounds

Finally, a significant portion of mismatches stem from informal workarounds. When payment deadlines are tight, staff may guess at a missing identifier, use a placeholder, or onboard a vendor before a W-9 is received. These quick fixes solve immediate operational needs but embed long-term data integrity issues.

When B-notices arrive, some teams update only the flagged record rather than performing a broader cleanup. Over time, these incremental fixes create inconsistent vendor data landscapes that make accurate 1099 reporting increasingly difficult.

Understanding the real cost of TIN mismatches

TIN mismatches are often treated as a technical nuisance or line item to clean up during 1099 season, but their financial and operational impact is far more substantial. Between escalating IRS penalty tiers, mandatory backup withholding, and the staff burden of B-Notice remediation, even a modest error rate can translate into meaningful cost and disruption for AP and tax teams.

IRS penalty tiers and the financial impact of mismatched filings

For 2024 information returns filed and furnished in 2025, the IRS has increased several penalty amounts. The structure remains tiered, but the exposure per form is higher than in prior years:

$330 per return or statement (up from $310) for failing to file or furnish an information return 

$60 per return or statement if corrected within 30 days of the filing or furnishing deadline

$130 per return or statement (up from $120) for corrections made after 30 days but before August 1, 2025 

$660 per return or statement for intentional disregard of filing or furnishing requirements, with no maximum cap; in some cases, this amount may be higher, as the penalty equals the greater of $660 or 10% of the aggregate amount that should have been reported

Penalty maximums also vary based on company size. Businesses with average annual gross receipts of $5 million or less face lower annual maximums, while larger entities have higher caps and intentional disregard has no maximum regardless of business size.

What makes these penalties particularly costly is they apply per form. For a payer issuing 500 information returns, a 5% to 10% mismatch rate corrected late could easily generate $8,250 to $16,500 in penalties. At enterprise scale, thousands or tens of thousands of returns puts the exposure balloons quickly.

Backup withholding at 24% and cash-flow disruption

Beyond penalties, a mismatched or missing TIN can trigger mandatory 24% backup withholding. This occurs when:

A vendor fails to provide a valid W-9

The IRS issues a B-Notice indicating the name/TIN combination does not match

The vendor does not respond quickly with a corrected TIN

Once backup withholding is required, AP must divert nearly a quarter of each affected payment to the IRS via Form 945, continuing until the vendor provides a certified, valid TIN. This has a number of consequences:

Vendors experience unexpected cash-flow reductions, often on payments they rely on for payroll or project costs

Payers must maintain additional reconciliation work, tracking withholding amounts, remitting funds to the IRS, and ensuring the vendor master reflects the correct TIN once obtained

Operational processes slow down, especially in organizations with limited automation for withholding logic

In sectors depending heavily on independent contractors like construction, healthcare staffing, real estate services, and gig platforms, these disruptions can materially impact project timelines and vendor satisfaction.

Staff and administrative burden: B-Notices, corrections, and delayed payments

When the IRS processes filed 1099s and detects a mismatch, it issues a CP2100/CP2100A B-Notice, triggering a mandatory, multistep workflow:

The payer must notify the vendor and request an updated W-9

If the vendor does not respond — typically within 30 days — the payer must begin or continue 24% backup withholding

AP and tax teams must track each affected vendor, monitor responses, update ERP records, and issue corrected returns

This process is highly manual in many organizations. Teams often spend hours logging notices, chasing vendors for documentation, uploading corrections, and coordinating with tax software providers, all within the tight timeframe of the early-year filing cycle.

In many cases, payments may be delayed until the correct TIN is confirmed, either because the payer wants to avoid compounding errors or because withholding processes are not fully automated. This can strain vendor relationships and create operational slowdowns at the exact moment organizations are trying to close books and prepare annual filings.

Practitioner guides routinely warn of a “January–March crunch” where penalty calculations, B-Notice compliance, vendor outreach, and system corrections collide. The administrative load alone can rival or exceed the actual penalty amounts, especially for organizations with large vendor populations.

Compliance pitfalls by industry

Different industries face different kinds of TIN and 1099 exposure. In some sectors, the way vendors are structured or how quickly they turn over creates more opportunities for mismatches, outdated data, and B-Notices. Below are three industries where those risks surface most often.

Healthcare

Healthcare organizations deal with a mix of tax rules and staffing patterns that make accurate name/TIN data hard to maintain. One key example is Form 1099-MISC, Box 6, which requires reporting payments of $600 or more for medical and healthcare services — even when the payee is an incorporated entity such as a PC, PA, or S-corp. This exception to the usual “corporations are exempt” rule frequently surprises AP teams.

Complication grows when you look at the provider landscape. Healthcare AP may be paying any number of recipients, including:

Physician groups and independent specialists

Locum tenens providers and travel nurses

Therapy contractors, billing partners, and lab services

Each uses different legal structures and naming conventions, increasing the chance of mismatched data. Add in heavy workforce turnover — particularly among contract clinicians — and it’s easy for vendor records to go stale before 1099 season arrives.

On top of tax reporting, healthcare organizations also face licensing, credentialing, and worker-classification requirements. Any breakdown in documentation, whether from a staffing partner or internal team, can compound both IRS and regulatory risk.

Construction and real estate

Construction and property operations rely on a steady rotation of subcontractors, tradespeople, and project-based specialists. This creates constant onboarding activity, and every new contractor relationship means another W-9 to collect, validate, and maintain.

The risk grows because teams often work across multiple systems, including project management tools, job-costing software, and ERP/AP platforms. Vendor data frequently gets re-keyed or inconsistently synced, leading to mismatched name/TIN pairs when 1099s are generated.

A second challenge is the speed of project work. Deadline pressure often pushes payments ahead of paperwork, leading to patterns such as the following:

Paying a subcontractor before a valid W-9 is on file

Reusing old or assumed TIN data from prior jobs

Deferring verification until year-end

These shortcuts tend to resurface as B-Notices, backup withholding, or penalty exposure once IRS matching takes place.

Gig economy

Gig platforms and online marketplaces face a different kind of challenge: scale. Thousands of contractors may join through self-service portals or apps. Without strong validation at the point of onboarding, large quantities of incomplete or inconsistent W-9s can accumulate quickly.

Even a small error rate (2–3%, for example) multiplied across tens of thousands of contractors can produce a high volume of mismatches and IRS notices. That’s why gig-based businesses often see disproportionate operational impact during 1099 season.

Worker classification concerns add to the mix. While classification (W-2 vs. 1099) is technically separate from TIN matching, the root causes often overlap, including unclear onboarding workflows, inconsistent documentation capture, and limited verification controls. Regulators continue to focus heavily on misclassification, raising the stakes for getting identity data right.

Global or remote workforces introduce another layer of complexity. Platforms must sort out when to collect W-9s vs. W-8 forms and ensure foreign payees aren’t tied to incorrect identifiers, a common source of reporting and withholding errors.

B-Notice and backup withholding chain reaction

A TIN mismatch doesn’t end with a rejected 1099. It triggers a sequence of IRS notifications, vendor outreach requirements, and potential 24% backup withholding that can ripple through AP operations for months. Understanding this chain reaction is essential for preventing unnecessary penalties and year-end fire drills.

How a B-Notice starts

The process begins after you file your 1099s. The IRS runs each name/TIN pair through its matching system. If any combination doesn’t align with IRS or SSA records, the agency sends the payer a CP2100 or CP2100A notice, a formal alert that one or more payees had invalid information.

Once a CP2100/CP2100A arrives, the payer must:

Identify affected vendors listed in the notice and confirm that the vendor master data reflects what was filed

Send each vendor a written B-Notice, explaining the mismatch and requesting a new, corrected W-9

Apply or continue backup withholding where required (e.g., for repeat mismatches or vendors who previously failed to respond)

Most organizations follow a roughly 30-day window for vendor response. If the payee does not supply a valid, certified TIN within that timeframe, future payments must be treated as subject to backup withholding until the issue is resolved.

The operational fallout for AP and tax teams

A B-Notice triggers more than just one letter — it sets off a multi-step administrative workflow that usually hits right after year-end filings:

Reviewing CP2100 files and reconciling flagged 1099s

Issuing, logging, and tracking all outgoing B-Notices

Managing vendor questions and disputes

Updating vendor master records with new W-9 information

Filing corrected 1099s when necessary

Because these notices often arrive shortly after 1099 filings, AP and tax teams must manage B-Notice remediation while also closing the books, handling Form 945 deadlines, and supporting other compliance cycles. The timing alone can stretch already limited resources.

When backup withholding kicks in

If a vendor fails to provide a correct TIN or if a second B-Notice indicates repeated mismatches, the payer must begin or continue backup withholding at a flat 24% rate on certain reportable payments, such as nonemployee compensation.

The payer’s obligations include:

Withholding 24% of each gross payment subject to reporting

Depositing the withheld amounts to the IRS, typically via EFTPS

Reporting totals on Form 945, the annual return for federal backup withholding

Even when only a small portion of vendors are affected, this requirement introduces new layers of operational work and risk: split payments, reconciliation between AP and tax systems, and additional audit scrutiny if withholding is late or miscalculated.

The financial and relationship impact

Backup withholding affects both sides of the transaction. 

Payers face the following consequences: 

More complex payment runs

Increased reconciliation to tie vendor-level withholding to Form 945 and 1099 totals

Potential penalties and interest if withholding isn’t handled correctly

Heightened audit exposure during IRS reviews

For vendors, the risk is equally daunting:

Immediate 24% reduction of each payment until the problem is fixed

Delayed access to those funds because they must wait to claim withheld amounts as a credit on their tax return

Frustration and confusion, especially if they assume the payer caused the issue

Strain on business relationships, particularly for small contractors and sole proprietors

Here’s the entire chain reaction in one timeline, which timeline shows why even a small number of mismatches can create a sizeable operational burden — because the process extends well beyond the moment the 1099 is filed and can affect payments, vendor relationships, and compliance exposure for months.

1099 filed

IRS detects mismatch

CP2100/CP2100A sent to payer

Payer issues B-Notice and requests new W-9

Vendor responds → process ends

Vendor doesn’t respond → payer must withhold 24% on future payments

Payer reports withheld amounts on Form 945 and files corrected 1099s if applicable

Building a proactive TIN-matching strategy

Most organizations treat TIN accuracy as a year-end chore — something to clean up right before 1099s go out. But the companies with the fewest B-Notices and the smoothest reporting cycles take the opposite approach, building build continuous, embedded controls that catch mismatches long before filings reach the IRS.

Using the IRS TIN Matching Program effectively

The IRS TIN Matching Program lets authorized payers check whether a vendor’s name/TIN combination matches IRS records. Instead of relying solely on whatever appears on a W-9, AP and tax teams can validate directly against IRS data, significantly reducing mismatches, backup withholding triggers, and B-Notices.

TIN matching is most powerful when used at a few key points:

Vendor onboarding: Validate the name/TIN before the first payment goes out.

During the year: Recheck vendors that change names, entity types, or ownership.

Pre-filing: Run a bulk validation sweep of all 1099-reportable payees to resolve issues before submitting forms.

Many organizations discover that simply shifting validation earlier, from year-end to onboarding, cuts their mismatch rate dramatically.

Real-time vs. bulk verification: When each matters

TIN matching comes in two flavors, and each supports different stages of the vendor lifecycle.

Real-time (interactive) matchingBest used when onboarding a new vendor or making updates that affect tax reporting:

One-off lookups for name/TIN validation

Used before the first payment or before high-value disbursements

Ideal for catching errors immediately rather than during 1099 season

Bulk matchingDesigned for large file uploads or automated, system-to-system checks:

Scrubs hundreds or thousands of vendors at once

Run annually, quarterly, or as part of year-end 1099 prep

Helps identify stale data, missing W-9s, and outdated entity names

Most modern AP and 1099 platforms integrate with IRS systems to support both methods, allowing teams to validate continuously instead of relying on manual reviews.

Practical checklist for AP and tax teams

A strong prevention framework blends onboarding controls, periodic reviews, and solid recordkeeping. The following checklist summarizes what high-performing teams do:

Pre-filing (Q4 through early January)

Confirm a valid W-9 is on file for every 1099-reportable vendor

Run bulk TIN matching to detect mismatches across the vendor population

Request and validate updated W-9s where mismatches appear

Ensure 1099 name and TIN fields match the validated W-9 exactly

Onboarding (year-round)

Require a W-9 before activating any 1099-eligible vendor or issuing payment

Review each W-9 for:

Legal name vs. business name

Correct classification box

SSN vs. EIN selection

Signature and date

Run real-time TIN matching; hold payment until a valid match comes back

Monitoring (quarterly or semiannual)

Identify vendors missing W-9s or using outdated documentation

Recheck vendors with prior mismatches or recent name/entity changes

Run bulk matching on all active 1099-eligible vendors

Track TIN-match pass rates as an internal KPI to measure improvement

Documentation (audit readiness)

Store W-9s in a centralized, secure system linked to each vendor record

Maintain logs of all TIN-matching runs, results, and corrections made

Retain W-9s and related correspondence for at least four years

How Sovos TINcheck can help

Sovos TINCheck offers a more proactive path for organizations looking for ways to shrink mismatch rates and avoid the annual scramble of B-Notices, penalties, and backup withholding. It’s designed as a lightweight but powerful identity-verification layer that plugs directly into vendor onboarding, contractor management, gig-worker platforms, and customer due-diligence processes.

What TINCheck does

At its core, TINCheck is a tax identity verification service that validates a payee’s name/TIN combination against authoritative IRS sources. But it goes further than simple TIN matching, adding watchlist and sanctions screening to help organizations strengthen compliance across tax, AP, vendor management, and platform operations.

TINCheck supports verification across a wide range of data, including the following IRS and U.S. taxpayer sources and global and domestic watchlists:

IRS name/TIN matching

EIN name lookup

IRS Exempt Organizations

GIIN (for FATCA compliance)

Death Master File

USPS address validation

OFAC sanctions lists (SDN, sectoral sanctions, FSE, etc.)

U.S. and state watchlists (FBI, excluded individuals/entities, export controls)

International lists from Canada, the EU, UN, Interpol, and others

The result is a streamlined “tax ID + KYC/AML” check in one step, which is valuable for organizations that must vet both vendors and customers.

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Where TINCheck fits in your processes

TINCheck is built for flexible use across the full vendor and contractor lifecycle. It supports three main modes of operation: fast, real-time checks, bulk validations, and embedded automation via API.

Fast, real-time checks

Ideal for onboarding new vendors, gig workers, or customers. Users can validate identities “in seconds” via a dashboard or embedded API, allowing AP or platform teams to move quickly without sacrificing accuracy.

Bulk validations

For large data sets such as vendor master files, contractor rosters, or pre-1099 review lists teams can upload a CSV and receive full results within 24 hours. This is especially useful for quarterly compliance sweeps or year-end 1099 scrubs.

Embedded automation via API

Engineering teams can integrate TINCheck directly into onboarding portals, workflow tools, or gig-worker apps so validation happens automatically, with no extra steps for end users.

This flexibility means that AP teams can run spot validations as needed, compliance teams can run bulk files to clean up records, and product/engineering teams can build automated checks into customer or contractor signup flows.

How TINCheck reduces B-Notices, penalties, and audit exposure

Sovos TINCheck can help organizations minimize their exposure to audits and penalties in the following ways:

Fewer B-Notices and CP2100 flags: By validating tax identities before 1099s are filed, most mismatches are caught early often eliminating the need for B-Notices altogether.

Lower penalty exposure: Correcting bad data before submission avoids penalties of $60–$330 per form, reducing the likelihood of repeat or systemic errors that lead to harsher fines.

Reduced backup withholding issues: When vendors are validated upfront, fewer payees fall into 24% backup withholding status due to missing or incorrect TINs, which stabilizes cash flow for contractors and simplifies Form 945 reporting.

Stronger audit readiness: TINCheck maintains logs of every check — who was screened, when, and against which lists — providing credible evidence of due diligence if the IRS or other regulators review your processes.

Built for enterprise use: Sovos emphasizes that TINCheck meets modern security and reliability expectations, making it suitable for organizations that want to centralize vendor verification rather than manage it through spreadsheets or ad hoc tools.

Turning reactive cleanup into continuous compliance

The biggest advantage of TINCheck is that it transforms TIN validation from a year-end scramble into an automated, year-round control. Organizations can:

Validate vendors and contractors at onboarding

Run bulk quarterly scrubs of the vendor master

Conduct full-file pre-1099 checks before e-filing

By embedding these steps into existing workflows, teams reduce errors at the source and avoid the costly chain reaction of mismatches, B-Notices, and backup withholding.
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