With the objective to cut down identity theft, the IRS has recently come up with a new regulation that gives users the opportunity to use a truncated taxpayer identification number (TTINs). In
simple terms, TTINs define the last four numbers of the Social Security number of a taxpayer; either asterisks (*) or Xs substitute the first five numbers of the identifying digits.
The new regulation recognizes that there are two aspects of using TTINs, which include the fact that they are used not only on electronic information, but also on paper. With reference to this aspect, the new regulation illustrates that the issuers can truncate their own EIN. Evidently, the new regulations make the process of filing easier; however, it carries some caution. It allows TTINS to be used only on information sheets and not on W2s. This is because the W2s have to contain the full SSN in order to allow the IRS to match the W-2 to the tax returns of every person.
Another important thing is that the processors of the issuers must have is the TIN, despite the fact that 1099-Ks are currently not in use. This is because the payment card processors remain an important requirement used to fine Form 1099-K that are used to report the gross revenue of a company from the payment cards. Even though the IRS declares that they no longer have the resources to match the forms with companies’ tax returns, the payment card processors still have a sense of duty. Furthermore, if the card processors do not have valid TIN of the files, then they must levy 28% backup withholding.
With the demanding compliance requirements along with the likelihood that the new regulation will breach the local privacy laws, it is important to question if foreign financial organizations would accept to become part of theenforcement of the IRS. However, the IRS will still direct notifications to card processors that have given wrong TINS on 1099-Ks filed in 2014. Different from the most countries, the IRS taxes on Americas depend on global income. Irrespective of the origin of the income, Americans have a duty to report it. Accordingly, Americans living in foreign countries must still pay U.S. taxes plus any foreign taxes liable to them.
Another important thing to note is that should you submit payments to a taxpayer who has a wrong SSN, the IRS will send a copy to the taxpayer who must give evidence of their genuine SSN. A second notice will be sent by the IRS to confirm that you do not have to apply backup withholding if the taxpayer delivers a copy of a valid SSN.
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