The IRS released proposed regulations that clarify the requirements for soliciting a taxpayer identification number (TIN) of a covered individual. They also provide a waiver of penalty for not providing a TIN in circumstances where the failure is due to reasonable cause. 

Missing TIN

A missing TIN will be considered to have been reasonably solicited if solicitation occurs when an individual initially signs up for coverage. If no TIN is received upon enrollment, a second solicitation must be made no later than 75 days from when the coverage became effective. The third solicitation must then occur no later than December 31 of the following year. This would generally be satisfied by requesting TINs during the next enrollment period. 

This process is slightly modified from the current process that has been provided by the regulations. Currently, the first solicitation would occur at initial enrollment, the second would occur by December 31 of that year and the third would occur by December 31 of the following year.   

The proposed regulations also confirm that a solicitation to the responsible individual, generally the one who actually enrolls themselves and others on the plan, is considered a solicitation for all individuals covered. However, if an individual is later added, for example due to birth of a dependent, the baby would require their own solicitation schedule.

Incorrect TIN

If an incorrect TIN is obtained, the same process should be followed that's laid out for a missing TIN. A Form 1095 validation error for a TIN and name that don't match IRS records isn't a penalty notice or notice requiring a new solicitation for a TIN. However, there isn't clear guidance as to whether or not a filer should resolicit a TIN in order to rely on the reasonable cause penalty waiver.

Missing TIN for Already Enrolled Individuals

For any currently enrolled individuals who haven't received a TIN solicitation at all, the proposed regulations allow for the first solicitation to occur within 75 days of July 29, 2016 in order to be considered compliant with the solicitation process. 

Conclusion

Employers needing to obtain TINs can rely on the timeline laid out in the proposed regulations immediately, as they'll have a retroactive effective date back to plan years beginning in 2015, and may be relied on for plan years beginning in 2014.

Information contained herein is not intended to constitute tax or legal advice and should not be used for purposes of evading or avoiding otherwise applicable regulatory responsibilities as issued by the federal or state government(s) and/or taxes owed under the Internal Revenue Code. You are encouraged to seek advice from your legal or tax advisor based on your circumstances.