How Gig Economy Companies Can Benefit From Compliancely Real-Time TIN Matching Service
As small businesses are making their way into mainstream industries, the gig economy is brewing with independent contractors, freelancers, and vendors.
Businesses sign contracts with independent contractors and freelancers. The employer or the business pays certain compensations in exchange for services or products availed from the freelancer or independent contractor.
For example, if your business is hiring a freelance designer for about 3 months to help your marketing team with some design work, your business has to pay the designer for the services provided.
In a typical quid-pro-quo relationship, the business gets the services or products from the vendor or freelancer and the vendor gets paid for the products or services provided. The agreements usually have all the terms and conditions regarding the nature of the work, particulars of the business transaction, amount to be paid, delivery dates, and other details.
While all of this happens at a secondary stage, a business that wants to hire a vendor in the first place asks for the vendor for TIN and name details to validate the credibility of the vendor.
This is done once the vendor and the business agree to work with each other and the accounting team of the business reaches out to the vendor with a W-9 Form.
TIN Matching: An Overview
Taxpayer Identification Number (TIN) is assigned by the IRS to entities and individuals who are allowed to work within the legal status provided to them in the U.S.
A TIN is used across all transactions, allowing the federal agencies to keep an eye on the monetary exchanges domestically and globally.
Every independent contractor that your business might be hiring must provide the TIN and the name details to your accounting teams to accelerate TIN Matching.
The process of verifying someone’s taxpayer identification number against the official records of the IRS allows businesses to conclude if the provided tax details are legitimate, which further throws light on the credibility of the vendor. This is known as a vendor TIN verification process.
Streamlining Vendor Onboarding Process
There are no doubts in the fact that the IRS will reject returns from businesses that report incorrect TINs. TIN discrepancies cost businesses at least $250 in penalties for every incorrect TIN reported.
Streamlining your vendor onboarding process to make place for W-9 Solicitation within the first few steps of your KYC allows your business to obtain the TIN details, establish a foundational relationship with your vendor, and helps ease things along the process.
A TIN Matching API like Compliancely enables this for you and allows you to onboard vendors in bulk and verify their tax details per the official records of the IRS in real-time, ascertaining seamless vendor onboarding experiences for businesses.
Optimizing KYC Process
A dynamic identity verification infrastructure like Compliancely allows businesses to optimize their KYC process and automate their identity verification experiences without dramatically changing the overall function.
For example, when you onboard several independent contractors for a certain project, you could create a primary vendor list, which can then be exported to the Compliancely API team. We will validate the TIN details of your vendors in bulk and generate TIN Matching reports. You can use the reports to make well-informed decisions about your vendor operations.
Validating Your Vendors
A dynamic TIN Matching API like Compliancely allows you to validate if the vendor is in good standing with the IRS. If the TIN matches the IRS records, it means that the vendor has submitted the tax reports over the years with diligence.
If the TIN does not match the IRS records, it could mean:
- The vendor did not provide the correct TIN/name information to you or,
- The vendor is not in good standing with the IRS and probably is trying to avoid certain communications with the IRS
This simple step allows you to remove any apprehensions you may have about your vendor and proceed to lock things in with confidence.
Avoiding Year-End Rush
Accounting teams work in timeline-sensitive ecosystems, where everything has to be submitted and reported by a certain time. This is especially true when it comes to tax deadlines.
Accounting teams have to put themselves through an awful lot to obtain the tax information from the vendors at the end of the year. This is an unfortunate situation that many accounting teams and paid preparers have to go through if the business does not have a proper vendor onboarding process in place.
Compliancely’s real-time TIN Matching API allows businesses to optimize their KYB processes, obtain the tax information from the vendor at the beginning of the year, and record every transaction with the vendor throughout the year, making it easy for accounting teams to report all vendor transactions on 1099-NEC and furnish vendor tax details accurately.
In Conclusion
Businesses that deal with an increased inflow of vendors have varied requirements in terms of obtaining information from the vendors and maintaining chronological records of all transactions.
Compliancely’s TIN Matching API allows businesses to identify, validate, and verify the vendor tax details, such as the TIN/Name combination of the vendor in real-time within a few seconds. This allows businesses to improve their vendor onboarding processes and onboard credible vendors.
