Payments to Suppliers with Incorrect Name and/or TIN: Required Federal Income Tax Withholding
In order to minimize administrative time and expense as well as to avoid the need for withholding on payments to suppliers, it is critical that the correct TIN information is initially obtained from the suppliers.
Pursuant to U.S. Treasury Regulations, the University is required to obtain the name and corresponding taxpayer identification number (TIN)1 for certain suppliers that are providing services to the University. Each year, the Internal Revenue Service (IRS) requires the University to file Forms 1099MISC, Miscellaneous Income, to report service payments to suppliers. The IRS imposes penalties on the University for each name and/or TIN reported on Form 1099MISC that does not match the information contained in the IRS database.
The IRS has notified the University that some of its supplier information reported on Forms 1099MISC does not agree with IRS records and has provided a list of those suppliers with an incorrect name and/or TIN. In response to this notification, the University has contacted these suppliers to obtain the correct supplier information. While the University has been successful in obtaining correct information from a number of suppliers, there are still suppliers for which the University does not have a correct name and/or TIN.
The University, in accordance with U.S. Treasury regulations, withholds federal income tax at a rate of 28% on payments made to suppliers from which it has not received correct TIN information. The regulations do not permit the University to refund the income tax withholding upon presentation of a correct TIN; however, suppliers can claim the withholding as a credit on their federal tax returns. Once a supplier provides the University with the correct information, the University will cease withholding income tax on future payments.
The University’s Supplier Compliance Unit is responsible for verifying that the supplier provided information is correct prior to payment. New supplier setup requests with missing or invalid TIN/ name combinations are placed on hold by the Supplier Compliance Unit and the supplier setup requestor and approver are notified via email. If the missing or invalid TIN / name combination is not resolved within 30 days, the supplier hold is released and withholding of 28% is applied to all payments to the supplier until the correct name and TIN are provided.