Michael Lloyd and Michael Chittenden Comment on Expansion of TIN Matching to Reduce Tax Penalties in BNA Daily Tax Report

"IRS Reporting Penalties Climb, as Risk of ID Mistakes Grows"
BNA Daily Tax Report

Michael Lloyd and Michael Chittenden commented on expansion of the taxpayer identification number (TIN) matching program as a way to reduce steep penalties resulting from incorrectly reported information on Internal Revenue Service (IRS) tax forms. Many types of businesses could be hit with the increased penalties since they are responsible for filing returns, and the penalties could be very expensive. That is where the matching program comes in, and it has reduced errors dramatically, Lloyd said. Mistakes in the forms are inevitable, he added, since third-party payers have to correctly identify each taxpayer and mismatches occur from time to time, which is more likely with the new Affordable Care Act forms. "Even when you're diligent, sometimes you make a mistake," Chittenden said.

Large filers say they have cut error rates by as much as 98 percent, meaning for every 100 erroneous matches in the filer's system, 98 have been corrected through the use of the TIN matching program. "Aside from granting approval to registered filers, essentially no work would be involved for the IRS, and permitting filers to use the program would reduce the burden of erroneous submissions on IRS, filers, and insureds," Lloyd and Chittenden said.

The congressional Joint Committee on Taxation (JCT) estimated the penalties would generate $13 million in 2017. With taxpayers figuring out new ACA-related forms and facing bigger penalties, Lloyd said the JCT estimate seems low. "How can you double the penalties and get only $13 million?" he said.

This article also appeared in BNA Tax Management Weekly Report on August 3, 2015.

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