Are you opening a new account? Here are four questions you should ask:
- Is this your correct TIN?
- Are you subject to back up withholding?
- Are you exempt?
- Are you exempt from FATCA? (This is used by foreign financial institutions but may appear on your forms)
Your financial institution has to report interest and dividend payments to the IRS. If your account holder's TIN is incorrect, then your institution has to go into the B-notice process and may be subject to penalties of $100 per name.
IRS Publication 1281 helps with these definitions:
What is backup withholding?
Persons (payers) making certain payments to payees must withhold and pay to the IRS a specified percentage (28%) of those payments under certain conditions. Payments that may be subject to backup withholding include interest, dividends, rents, royalties, commissions, non-employee compensation, and other payments including broker proceeds and barter exchange transactions, reportable gross proceeds paid to attorneys, and certain payments made by fishing boat operators. Payments that are excluded from backup withholding are real estate transactions, foreclosures and abandonments, cancelled debts, distributions from Archer Medical Savings Accounts (MSAs), long-term care benefits, distributions from any retirement account, distributions from an employee stock ownership plan (ESOP), fish purchases for cash, unemployment compensation, state or local income tax refunds, and qualified tuition program earnings.
What is a Taxpayer Identification Number (TIN)?
A TIN is a Social Security Number (SSN) issued by the Social Security Administration (SSA) or an Employer Identification Number (EIN) issued by the IRS. A TIN can have only nine (9) numbers. It cannot have more or less than nine numbers nor can it have letters. See Question #3 for information on ITINs and ATINs.
What is an Individual Taxpayer Identification Number (ITIN)/Adoption Taxpayer Identification Number (ATIN)?
An ITIN is an individual Taxpayer Identification Number (ITIN) issued by the IRS and may be used as a TIN to meet federal tax obligations only. Resident aliens and nonresident aliens, who are not eligible for SSNs, use ITINs. An ITIN has nine numbers in the same format as an SSN and always begins with the number 9. The fourth and fifth digits are always within the range of 70 through 88. An ATIN is an Adoption Taxpayer Identification Number issued by the IRS and can be used as a TIN. An ATIN is only a temporary taxpayer identification number issued for a child born, and adopted, in the United States. An ATIN contains nine numbers in the same format as an SSN. An ATIN should be requested when an SSN cannot be obtained in time to file your tax return. Once the adoptive parent obtains an SSN for the adopted child, the ATIN becomes obsolete.
Can a payee claim he or she is exempt from backup withholding?
Yes. Payees who may be exempt are listed in the "Instructions for the Requester of Form W-9". They include tax-exempt organizations, government agencies, corporations (for certain payments), and other listed entities.
You can register with the IRS to make sure the name you enter to open the account matches the TIN. This has to be for interest reporting purposes.
E- Services provide various electronic and interactive applications. For more information about the e-services provided by the IRS, click here
. Payers of income reported on Forms 1099 B, DIV, INT, K, MISC, OID, and/or PATR may be eligible to participate in the TIN Matching program. You can download the TIN Matching Publication, 2108A, by clicking here