TIN ComplianceA resource from TIN Comply
Template · Policy and procedure

Vendor TIN & information-reporting policy

A written procedure covering scope, onboarding, solicitation schedule, verification, B-Notices, withholding, records and roles. What an auditor or a 972CG response asks for. Read it below, copy the text, print it, or download the .docx for your letterhead.

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Template from tincompliance.com. A written procedure for collecting, verifying and correcting payee TINs and handling IRS notices. Adopt it with your own names, systems and thresholds; a written, followed procedure is the clearest evidence of "ordinary business care" under Treas. Reg. 301.6724-1. Not legal advice; have counsel review before adoption.

[Company] Vendor TIN and Information-Reporting Policy

Policy owner

[Title, e.g. Director of Accounts Payable]

Approved by

[Title / committee]

Effective date

[Date]

Review cycle

Annually, each November, and on any change in IRS thresholds or procedures

Version

1.0

1. Purpose and scope

This policy establishes how [Company] collects, verifies, corrects and retains taxpayer identification numbers (TINs) for payees, applies backup withholding, responds to IRS notices, and documents these steps so that information returns (Forms 1099 and 1042-S) are accurate and penalties under IRC §§6721 and 6722 can be waived for reasonable cause. It applies to every payee set up in [ERP / AP system] and to every department that initiates a payment, including purchasing-card and petty-cash payments.

2. Definitions

  • TIN: a Social Security number, Individual Taxpayer Identification Number or Employer Identification Number.
  • Reportable payment: a payment that must be reported on an information return (nonemployee compensation, rent, royalties, medical payments, attorney payments, prizes, interest, dividends and others) above the applicable threshold.
  • Solicitation: a documented request to a payee for a correct TIN, by Form W-9 or an equivalent electronic form.
  • B-Notice: the letter sent to a payee after the IRS reports a name/TIN mismatch on a CP2100 or CP2100A notice.

3. Roles and responsibilities

Accounts Payable

Collects W-9/W-8 at setup, runs TIN verification, maintains the solicitation log, applies backup withholding flags, sends B-Notices.

Tax

Owns information-return filing, Form 945 and 1042 reporting, CP2100 and 972CG responses, and this policy.

Procurement / departments

Do not commit to a new supplier before setup is complete; route all new payees through AP.

Compliance

Owns sanctions and exclusion screening and its cadence.

IT

Maintains the withholding flag, the electronic W-9 audit trail and record retention in [system].

4. Payee setup (before the first payment)

  • Determine U.S. or foreign status. U.S. persons provide Form W-9; foreign persons provide the applicable Form W-8. No payment is released until the form is on file, except as approved in writing by [Tax].
  • Collect the W-9 through [portal / method]. Electronic W-9s must display the certification, capture an electronic signature, and record the date, time and IP address of submission.
  • Verify the name/TIN pair against IRS records through [the IRS TIN Matching Program / service] before setup is completed. Record the date and result code.
  • On a mismatch (code 2 or 3), contact the payee with the specific likely cause (name on line 1) and obtain a corrected W-9 before the first payment. Do not set up a payee with a known-bad pair without [Tax] approval.
  • Screen the payee and, where applicable, its principals against OFAC SDN and Consolidated lists [and SAM.gov / HHS-OIG LEIE / state lists as applicable]. Record the list date and result.
  • Classify the payee for reporting (individual, sole proprietor, partnership, corporation, exempt organization, government, foreign) and set the 1099 flag accordingly, including the corporate exceptions for attorney and medical payments.

5. Solicitation schedule for missing TINs

For any payee set up without a TIN, AP will make and log: (a) the initial solicitation at setup; (b) a first annual solicitation by December 31 of the year the account was opened (January 31 of the following year for accounts opened in December); and (c) a second annual solicitation by December 31 of the following year, as required by Treas. Reg. §301.6724-1. A December sweep of all active payees without a TIN is performed each year by [date] and logged.

6. Backup withholding

  • Backup withholding at the current rate (24%) is applied to every reportable payment to a payee who has not furnished a TIN, from the first payment, and to payees who have not responded to a B-Notice by the deadline in section 7.
  • The withholding flag is set in [system] by AP and applied automatically at payment; it is removed on the next payment after a valid W-9 (or, after a Second B-Notice, agency validation) is received.
  • Withheld amounts are deposited through EFTPS by [Tax / Treasury] on the schedule required for the company’s deposit frequency, reported annually on Form 945, and shown in box 4 of the payee’s Form 1099.

7. IRS notices

  • CP2100 / CP2100A: [Tax] logs the notice date and date received on receipt. AP compares each listed account to current records and excludes accounts already corrected. First B-Notices (with Form W-9) or Second B-Notices (with agency-validation instructions, no W-9) are mailed within 15 business days, in envelopes marked "Important Tax Information Enclosed." Backup withholding begins no later than 30 business days after the notice date for payees who have not responded. Listed accounts are tracked for three years to apply the second-notice rule.
  • Notice 972CG: [Tax] responds within 45 days (60 if applicable) with a reasonable-cause statement supported by the solicitation log and B-Notice records, or pays or agrees in part as appropriate.
  • C-Notices (interest and dividend under-reporting) [if applicable]: withholding begins as directed and continues until the IRS notifies otherwise.

8. Information-return filing

  • Forms 1099 are filed electronically by the due dates in the IRS General Instructions; 1042-S by March 15. A pre-filing TIN re-verification is run on all payees with reportable amounts by [date].
  • Corrections are filed within 30 days of discovery to preserve the reduced penalty tier.

9. Records

The following are retained for at least four years after the due date of the related return, and CP2100 records for at least three years after the first notice: Forms W-9 and W-8; the solicitation log (date, method, payee, response); TIN verification results; sanctions and exclusion screening results; CP2100 and 972CG notices and responses; B-Notices sent, with mailing dates; withholding start and stop dates; Forms 945 and 1042 and deposit records. Full TINs are stored only in [system]; working files and spreadsheets carry the last four digits only.

10. Training and review

AP and procurement staff receive training on this policy at hire and annually. [Tax] reviews this policy each November against current IRS thresholds, penalty amounts and procedures (see tincompliance.com/figures/) and records the review date above.

Appendix A. Key dates

January 31

Forms 1099-NEC, W-2 and 945 due (next business day if a weekend)

March 31

Electronic filing of other 1099 series

Spring and fall

CP2100 / CP2100A notices; 15- and 30-business-day clocks

August 1

Last day for the reduced ($130) correction tier

December 31

Annual solicitation deadline for missing TINs

Appendix B. Systems and contacts

AP system

[Name]

W-9 collection

[Portal / method]

TIN verification

[IRS TIN Matching / service]

Sanctions screening

[Service and lists]

Policy questions

[Name, email]

How to use it

  • Adopt the policy with the titles and systems you actually use; an auditor reads it against what you do. More
  • Review it every November against the current thresholds and dates. More
  • The solicitation log is Exhibit A of every reasonable-cause statement; keep it current, not reconstructed.
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A general-purpose starting point, not legal advice. Your facts, and your counsel, control what you send.