What TIGTA measured
Both audits used the information returns themselves. TIGTA matched the TINs on filed Forms 1099 and W-2G against IRS and SSA records, counted the returns whose payee TIN was "not provided, has more or less than nine numbers, or has an alpha character" (missing) or "in the proper format, but the name/TIN combination does not match or cannot be found" (incorrect), multiplied the reported payments by the backup withholding rate, and compared the result to the withholding reported in box 4 (TIGTA Ref. No. 2021-40-030, footnotes 11 and 12). For incorrect TINs the analysis counted only payers that "reported the same incorrect TIN for four consecutive years," which is a deliberately conservative population: a payer that has filed the same wrong number four years running has received CP2100 notices and done nothing.
TIGTA Ref. No. 2021-40-030, Figures 2 to 5.
The numbers
"For Tax Year 2018, TIGTA identified 182,075 payers that submitted 440,404 information returns for which the payee Taxpayer Identification Number was either missing or incorrect, yet the payers did not backup withhold $13.3 billion on $55.6 billion in reported income" (TIGTA Ref. No. 2021-40-030, May 17, 2021).
TIGTA Ref. Nos. 2016-40-078 (Sept. 14, 2016) and 2021-40-030 (May 17, 2021), Figure 3.
The comparison between the two audits is the one the IRS would prefer. Returns with missing TINs fell from 310,779 to 266,617, reportable payments on them from $145 billion to $44 billion, and required withholding from $41 billion to $11 billion; the incorrect-TIN population barely moved. TIGTA's reading was less generous: "Since issuing our prior report in September 2016, management has made little improvement to address payers not backup withholding billions of dollars as required" (TIGTA Ref. No. 2021-40-030). The amount actually withheld on missing-TIN returns across the whole population was $6 million against $11 billion required.
"TIGTA's review identified 13,647 payers that submitted 27,576 information returns with the same missing payee TIN for two years in a row (TYs 2012 and 2013). These returns reported payments of about $14.3 billion. As such, payers were required to immediately withhold nearly $4 billion from these payees, yet just more than $1 million was withheld" (TIGTA Ref. No. 2016-40-078, Sept. 14, 2016).
The IRS's response to the figures is worth knowing because it is the defence a payer will meet from the other direction. Management "noted that there could be a number of factors for which backup withholding is not applicable. For example, some taxpayers may use the Form 4669, Statement of Payments Received, and Form 4670, Request for Relief of Payment of Certain Withholding Taxes, process, which relieves the payer of their backup withholding liabilities. Additionally, it is possible that income reported on an information return with a missing payee TIN may have in fact been reported to the IRS on a subsequent information return with the correct payee TIN." TIGTA's reply: "no analysis has been performed by the IRS that would determine to what extent this occurs" (TIGTA Ref. No. 2021-40-030). The Form 4669 guide covers the relief the IRS mentioned.
Who the noncompliant payers are
The 2021 report names no payers but sizes them. "Five payers that each should have backup withheld $10 million or more" on missing TINs "submitted a total of 683 information returns, which accounts for $396 million in potential backup withholding," and eight more payers with over 1,000 returns each accounted for $332 million; "these payers represent $728 million in backup withholding not withheld as required" (TIGTA Ref. No. 2021-40-030, Figures 4 and 5). The report's recommendation to the IRS was to use "data analytics ... to maximize its limited resources by focusing enforcement efforts on highly noncompliant payers." By form type, the 2018 population was overwhelmingly Form 1099-MISC (180,055 payers and 339,695 returns of the 440,404), with the 1099-B, INT and DIV filers a distant second; nonemployee compensation had not yet moved to the 1099-NEC (Figure 2). The payers in these counts are, in other words, ordinary businesses paying contractors without a W-9, not financial institutions.
Decedent TINs
"Our review identified 52,500 payers that submitted 2.7 million information returns for which the payee was deceased at least three years prior to the issuance of the information return. These 2.7 million information returns had reportable payments totaling $3.7 billion" and "only $9.5 million was withheld" (TIGTA Ref. No. 2021-40-030). Only 5 percent of those 1.2 million decedent TINs appeared on any return reporting the income.
The 2016 report found the same thing for tax year 2013 (2.3 million returns for 1.6 million deceased individuals, $4 billion in payments) and recommended the IRS address it; the 2021 report's first recommendation was again that the IRS "develop processes and procedures to identify and address the reporting of income on information returns using a decedent TIN." The IRS agreed, planning "to use data analytics to determine the size and scope of potential noncompliance" (TIGTA Ref. No. 2021-40-030, Recommendation 1). For a payer the point is practical: a 1099 filed under a TIN whose owner died years ago passes TIN Matching, because the number and name still agree in the IRS file, and it will not draw a CP2100. It is nevertheless the wrong payee, the income is going unreported, and TIGTA has twice told the IRS to find the payers who file them. The TIN mismatch page covers the estate and successor rules; a new W-9 from whoever is actually being paid is the fix.
What the IRS did about it
In response to the 2016 report the IRS "Stood up two new groups in Calendar Year 2019 to address reporting and noncompliance issues relating to backup withholding and the IRS Combined Annual Wage Reporting (IRS-CAWR) program. The IRS assigned 13 tax examiners to the backup withholding group" (TIGTA Ref. No. 2021-40-030). That group is the one behind the Letter 6112 compliance checks described elsewhere on this site.
The 2016 recommendations were four: "establish a Service-wide information returns backup withholding enforcement strategy," "document criteria used to exclude payers from receiving a notice," "Update payer identification and notification processes to include Forms 1099-G with missing or incorrect payee TINs," and update the publications to match (TIGTA Ref. No. 2016-40-078, Recommendations 1 to 4). The IRS agreed with all four. By 2021 it had added Form 1099-G to the program, revised Publication 1281, presented at Tax Forums, and created the two campus groups. What it had not done, in TIGTA's account, was build the targeting that the numbers call for; the report notes that "Functional areas initiated some efforts in an attempt to address backup withholding noncompliance, but these efforts are fragmented and inconsistent" (TIGTA Ref. No. 2021-40-030). The 13-examiner backup withholding group is the unit whose work the compliance-check guide describes from the manual's side.
What it means for a payer
Three things. First, the exposure is real and quantified: the IRS knows, from the same data TIGTA used, which payers filed 1099s with missing TINs and withheld nothing, and Chief Counsel has since confirmed that the obligation to withhold on a missing TIN exists "regardless of whether the payor receives and complies with a CP2100 or CP2100A notice" (PMTA 2023-03; see the Chief Counsel page). Second, the enforcement is thin and targeted: thirteen examiners against 182,075 payers means the IRS works the largest cases, and TIGTA's $10 million and 1,000-return thresholds are a fair guess at where attention goes first. Third, the incorrect-TIN population TIGTA counted is defined by four consecutive years of the same wrong number, which is exactly the record a CP2100 and a B-Notice program are meant to break; a payer that fixes or withholds on a mismatch the first year is outside the count. The examination guide describes what happens when the IRS does arrive.
Questions people ask
Are these reports still current?
They are the two most recent TIGTA audits specifically on backup withholding by payers. TIGTA's later work on the subject appears in its semiannual reports to Congress rather than a dedicated audit, and the IRS's organisation has changed since 2021. The underlying obligation and the IRS's data have not.
Does TIGTA's $13.3 billion include payees who later reported the income?
No adjustment was made for it. The IRS raised the point and TIGTA answered that the IRS had not measured it. A payer's own relief for payees who reported the income is Forms 4669 and 4670, which reduce the tax but not the penalties or interest.
Why does TIGTA count only four-year repeat incorrect TINs?
Because a single mismatch may be a one-off error and backup withholding on an incorrect TIN does not start until the IRS notifies the payer. Four years of the same wrong number means notices were sent and ignored; it is the population the IRS can least excuse.