If you are involved in your organization’s year-end tax filing process, you know the importance of maintaining accurate individual and vendor tax data. Tax Identification Number (TIN) matching is a critical process that can help protect your organization from errors, B-notices and penalties from the IRS.
TIN matching typically occurs at two points in a vendor or customer relationship: first, when onboarding a new vendor or customer with information collected on Form W-9, and second, prior to reporting amounts paid on 1099s to ensure TIN/name information is still accurate.
TIN matching typically occurs at two stages in a business relationship:
- During onboarding, when a new vendor or customer submits their Social Security Number (SSN) or Employer Identification Number (EIN) on Form W-9.
- Before filing 1099 forms, to verify that the TIN/name combination is still valid and up to date, preventing reporting errors and potential penalties from government agencies such as the IRS and Social Security Administration (SSA).
What Is the Death Master File (DMF)?
The Death Master File (DMF) is a database maintained by the Social Security Administration (SSA) containing records of over 142 million reported deaths dating back to 1899. This file ensures that businesses, financial institutions and government agencies do not issue payments, benefits, or services to individuals who are deceased.
The SSA DMF is a critical tool for businesses, financial institutions and government agencies to prevent fraudulent transactions, tax evasion and unauthorized payments to deceased individuals. The DMF includes vital details such as:
- Full name
- Taxpayer identification number (TIN)
- Date of Birth
- Date of Death
- Death Records & Reports
Since SSNs remain in the IRS database even after a person’s death, businesses must ensure that a TIN/name combination submitted on Form W-9 does not match a record in the DMF. This verification step is essential to prevent fraudulent transactions and ensure compliance with Section 205(r) of the Social Security Act, which governs the use of death records for tax and identity verification.
Public vs. Full Death Master File
There are two primary versions, each with different levels of access and data availability: the Public DMF and the Limited Access Death Master File (LADMF). Businesses using the DMF must comply with strict NTIS (Technical Information Service) requirements to prevent misuse and protect personal information.
The Public DMF is accessible through the National Technical Information Service (NTIS) under the Department of Commerce. It includes limited death records and does not contain state-reported death data. Banks, credit reporting agencies and some financial institutions use this version for identity verification.
The LADMF is the full version that includes death reports received from states, hospitals and funeral homes. Due to privacy laws and Section 205(r) of the Social Security Act, access to this restricted death data is only available to certain entities such as government agencies, financial institutions, and insurers.
What Happens If a TIN Appears on the Death Master File?
If a Tax Identification Number (TIN) submitted during verification matches a record in the Death Master File (DMF), it raises an immediate red flag. This match could indicate one of several critical issues:
- The individual associated with the TIN is deceased: The most common reason a TIN appears on the DMF is that the person associated with it has passed away. In this case, issuing payments, tax forms, or benefits in their name would be an error that could result in rejected tax filings, incorrect 1099 reporting and unintentional tax fraud if payments continue under the deceased’s identity. To correct this, businesses should stop payment processing and confirm with the payee’s estate or legal representative before proceeding.
- A fraudulent identity may be in use: Criminals sometimes exploit the TINs of deceased individuals to commit identity theft, open fraudulent accounts, or misappropriate funds. If fraud is suspected, businesses should take immediate action and remain on high alert for a potential tax scam.
- There is an error in the records: In some cases, a mismatch may occur due to outdated or incorrect information within government databases. Clerical errors, incorrect death reports, or incomplete updates may mistakenly flag a living individual as deceased.
What to Do When a TIN Matches the DMF
If a TIN/name combination appears in the Death Master File, businesses and financial institutions should take immediate action to ensure compliance and prevent fraudulent transactions. Here’s how to respond:
1. Halt any transactions involved
Immediately stop any payments, tax filings, or financial transactions associated with the flagged TIN. Proceeding without proper verification could lead to IRS penalties, financial losses, or unintentional fraud.
2. Verify the Accuracy of the TIN/Name Information
Double-check the TIN and name combination against the provided Form W-9 or other official records. If a clerical error occurred (such as a typo in the TIN or name), correcting it may resolve the issue.
3. Request Additional Documentation
If the individual or entity claims they are still active and the TIN is valid, ask for supporting documents such as a new, signed Form W-9, official IRS or SSA documentation confirming the TIN’s validity (such as a social security card, or a government-issued ID to confirm the individual’s identity (if applicable).
4. Report Potential Fraud Cases
If fraud is suspected, organizations should escalate the case internally and report it to the relevant authorities, such as the IRS, SSA, or financial fraud units. This step is crucial for preventing further fraudulent activity and ensuring compliance with regulatory guidelines.
5. Consult a Tax Professional or Compliance Officer
Before making any final decisions, businesses should seek guidance from a tax expert or compliance professional. They can help navigate IRS regulations and determine whether payments, tax filings, or vendor relationships need to be adjusted.
With millions of 1099 forms still being issued to deceased individuals, the IRS is increasing scrutiny on TIN verification processes. By using a trusted verification service like TINCheck, organizations can ensure that their tax reporting and financial transactions are fully compliant with federal regulations.
For real-time TIN verification and DMF screening, visit TINCheck.com/verification-lists.