3/28/24 1:48 PM

Your Guide to Taxpayer Identification Number (TIN) Verification

It’s everyone’s favorite time of year.

No, we’re not talking about the dawning of spring, March Madness, or even the anticipation of the first pitch of Opening Day.

We’re talking about tax season. <Pause for audible groans>.

Yes, we know, it’s likely no one’s favorite topic. But with the April 1 electronic filing deadline just around the corner, SoftPro is here to make sure you’re up to date on a critical detail that should demand every title and settlement agent’s attention: the Taxpayer Identification Number (TIN).

What is a Taxpayer Identification Number (TIN)?

Whether it's an Employer Identification Number (EIN) or a Social Security Number (SSN), a TIN is a nine-digit number assigned by the Social Security Administration (SSA) that’s essential for tracking individuals and entities for tax purposes.

For every real estate transaction, the accurate submission of a seller’s TIN on the 1099-S form is an essential best practice. The problem? This takes a lot of time and energy, and the risks of error are high.

The Cost of Error

The penalties for a title or settlement agent who submits a 1099-S with a mismatched or incorrect TIN can be steep. The IRS strictly enforces these reporting requirements, which include accurate reporting of the property seller’s TIN and name.

If the TIN on Form 1099-S doesn’t match the name of the seller on record, the IRS can hit you with a CP2100 or CP2100A notice and inform you that you need to start holding back 24% of what you're supposed to pay the vendor in the future. That means you need to fix the mistake (and quickly), which usually involves sending out a notice to the payee to gather the correct information on the W-9 form or to start backup withholding. Getting a TIN or name wrong on the form can cost up to $280 each time it happens, and trust us, that can add up quickly.

Sounds bad, right? There are also broader penalties for late filing, failing to file, or incorrectly filing Form 1099-S. For example, if you're 30 days late, the fine is $60 for each form. But if you file after August 1 or don't send it in at all, the fine jumps to $310 for each occurrence. For large companies, the total fines can get as high as $3,783,000 ($1,261,000 for small businesses) in a year, and these fines are the same whether you file on paper or electronically.

In summary, you must file Form 1099-S correctly and on time, and it’s important to verify the correct TIN for each seller. Failure to do so may cost you.

A Custom Integration Solution

Thankfully, SoftPro offers an easy-to-use custom integration that allows SoftPro Select users to validate that the TIN/SSN matches the seller’s name in the IRS records prior to settlement.

Why is this important?

By validating before the closing, your risks and issues of post-IRS filing errors are substantially reduced. Our customers greatly appreciate this integration, particularly because it provides them the ability to secure accurate Tax ID information before the seller disappears and the check clears. This not only saves time but also reduces the risk of the penalties and fines mentioned earlier.

The SoftPro Select custom integration for TIN validation is designed as a "Real-Time Identity Verification" system. In other words, it acts as a comprehensive Payee Verification System that supports a range of verifications, including addresses, casinos, and OFAC (Office of Foreign Assets Control) checks. This multifaceted approach streamlines the whole process and enhances the integrity and security of each transaction.

The TIN solution in SoftPro Select is a custom integration thoughtfully designed to fit into the workflow of title and settlement professionals, offering a robust but user-friendly solution. Want to learn more about the custom TIN integration and how to start using it? Contact SoftPro Sales at 800-848-0143 ext. 1 or sales@softprocorp.com for more information.

Contact us to learn more about our TIN verification integration:


The Bottom Line

Benjamin Franklin once said that the only things certain in life are death and taxes, but tax season doesn’t have to be the death of you. SoftPro has your back. While the penalties and risks are high when it comes to getting seller verification wrong, the custom integration in SoftPro Select for TIN validation can help title agents like you avoid issues and protect you from fines before the ink on the closing documents dry. In other words, let us help make your tax reporting more certain.

Need additional help navigating tax season and preparing your 1099-S forms? Check out this blog post and watch Episode 51 of our Saved You a Seat webinar series for more insights.

Read our 1099-S Filings blog:READ BLOGWatch our 1099-S Filings webinar:WATCH RECORDING


Topics: Guides & E-books, 1099

Stay up-to-date on the information about industry regulatory requirements, events, customer successes, company updates, and more!

Subscribe to Email Updates

Recent Posts

see all