TIN Validation Errors Can Mean Penalties From The IRS

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Applicable Large Employers (ALE) – companies with 50 or more full-time and full-time equivalent employees have just recently completed the 7th year of annual ACA information return filing (Forms 1094-C and 1095-C) with the IRS. Many have received error notices indicating that a “TIN Validation Error” has occurred. This article will address what these errors mean, and what the IRS expects from employers that receive these notices. 

What Is a TIN Validation Error? 

This error means that information returns were filed with missing or incorrect taxpayer identification numbers (e.g. social security number). It could be that an employee’s name doesn’t match a social security number (SSN), or the SSN is incorrect. A common reason for the error may be that the employee changed their last name, perhaps for marriage purposes. The IRS does not provide detailed information on what exactly caused the error. 

Am I Required to Correct These Errors? 

Yes. The IRS requires employers to correct information returns within a reasonable period time following receipt of a notice of an incorrect TIN. In the event that you receive notice that your ACA reporting has been “Accepted with Errors”, the following steps should be taken to rectify the errors. 

1. Verify that HR records are up to date and correct. Review the employee’s initial W4 form. 
2. Try to obtain correct information including a solicitation from the employee. 
3. Resubmit corrected forms if errors have been identified. 
4. Document all efforts made to solicit correct information so that a good faith effort can be proved in case of IRS audit. 

See IRS Publication 1586, rev. 10-2021, for full details on correction TIN errors. 

What If I Do Nothing? 

The IRS can impose significant penalties on employers for failing to file, and for untimely or inaccurate information returns. The Small Business Jobs Act of 2010 increased the penalties for failure to comply with information return filing requirements, and the calendar year maximum limitations for all business also increased. The penalty can be reduced if a known error is timely corrected. NOTE – There are no maximum penalty limitations for compliance failures due to intentional disregard. 

What If I Cannot Correct the Error? 

An employer may be able to show reasonable cause that the failure to provide a correct TIN was not willful. This can include demonstrating a pattern of filing correct returns, events beyond the control of the filer, and a demonstration of making solicitations for correct information from the employee.  

Do I Have to Pay to Retransmit Corrected Forms? 

Yes. If you used an electronic filing platform such as Employee Navigator or Ease to transmit your 1095-C forms, you will be required to pay the usual cost to retransmit corrected forms. However, you are only required to retransmit corrected forms, not the entire batch. 

Additional information about TIN validation can be found at www.irs.gov, or contact Morris & Garritano Director of Compliance Keith Dunlop at kdunlop@morrisgarritano.com for questions regarding this or any other ACA-related issue. 

This information is general and is provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.