What procedures should I follow to obtain the correct TIN from my employees and avoid Information reporting penalties from the IRS?
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Last modified 12/31/2020 4:38:12 AM EST |
Added by ACAwise Team
Under the IRC section 6056 ACA employer information reporting provision, ALEs must file the forms with correct information on time with the IRS and furnish copies on time to their employees. Employers who fail to comply with this may be subject to ACA penalties under IRC Section 6721 and receive a 972CG penalty notice from the IRS.
Once you receive a 972CG penalty notice from the IRS stating you filed the ACA information returns with missing or incorrect name/TIN combination, You must respond to it within 45 calendar days from the notice date. To do so, you must solicit the employee's correct TINs to meet reasonable cause criteria and avoid information reporting penalties.
Manner of TIN Solicitation
An employer generally makes a TIN solicitation request to the employee to furnish a correct TIN.
An initial solicitation for an employee's correct TIN is made when an account is open unless you already have your employee’s TIN and use that TIN for all accounts of the employee.
If the correct TIN was not received from the employee after the initial solicitation, you must make up to two annual solicitations until a TIN is obtained.
Generally, you can conduct annual solicitation for a correct TIN in one of the following ways to obtain a waiver for reasonable cause.
You can send an annual solicitation mail to an employee comprising the below three items:
- A letter stating that he/she must provide an accurate TIN. If they fail to do so, it may result in a $50 penalty under IRC 6723.
- Form W-9, request for TIN and certification, if applicable.
- An optional return envelope
By Telephone Call
To obtain the correct TIN, you must:
- Call each employee with a missing or incorrect TIN and inform him/her to provide an accurate TIN. If they fail to do so, this may result in a $50 penalty under IRC 6723.
- Maintain a contemporaneous record showing that the solicitation is properly made. So, you can provide this to the IRS, if applicable.
When establishing an electronic solicitation to receive a correct TIN from the employee, make sure:
- You received the information from the right person for the information sent. You can identify it through the submission of their Form W-4, W-9, and W-9S.
- You receive the employee's electronic signature, whose name appears on the Form W-4, W-9, and W-9S.
- You can distribute the hard copy of electronic Form W-4, W-9, and W-9S if requested by the IRS.
- Please note, when you establish an electronic system to receive Form W-4 from the employee, you should also have the paper option available to employees upon their request. In case they have limited access to use the electronic system.
First Annual Solicitation
You can make the First annual solicitation if you have not received the TIN from the employee after the initial solicitation.
You can conduct the first annual solicitation on or before December 31st of the year (if the account opened before December) or on January 31st of the following year (if the account opened after December of the preceding year).
Second Annual Solicitation
You can make the second annual solicitation if you have not received the correct TIN from the employee after the first annual solicitation.
You can conduct the second annual solicitation on or before December 31st of the year (if the account opened before December) or on January 31st of the following year (if the account opened after December of the preceding year).
These methods allow you to obtain the correct TIN from your employees and avoid Information reporting penalties from the IRS.
Get in touch with ACAwise, if you have received a penalty Notice 972CG from the IRS and aren’t sure how to respond to it. We will assess to inform you of your options and provide clear instructions to proceed further.