As IRS regulations expand to cover digital assets, companies must take proactive steps to ensure tax compliance. Amendments to Sections 6045 and 6045A now classify digital asset platforms, payment processors, and wallet providers as brokers, subjecting them to the same reporting requirements as traditional securities.
To help firms stay compliant, Comply Exchange recently delved into the IRS TIN matching program and why firms should be proactive.
Alongside this, Section 3406’s backup withholding rules and penalties under Section 6721 make accurate Taxpayer Identification Number (TIN) collection critical. The IRS TIN Matching Program is a key tool for validating TINs and preventing costly mistakes. Although Notice 2024-56 provides some relief for digital asset sales, it excludes rewards, staking, and backup withholding obligations—making TIN matching even more essential.
Best practice is to collect and validate TINs during account opening. Real-time matching offers instant results and is useful for onboarding, while bulk matching is suited for cleaning up existing records ahead of reporting deadlines.
The benefits of IRS TIN matching are clear: fewer errors, stronger compliance, lower risk of penalties (up to $660 per incorrect return), and smoother customer experiences. While access to the IRS platform can be restrictive, third-party providers like Sovos offer alternative solutions to support compliance efforts.
For further insights, experts from Comply Exchange, Sovos, and Legible recently shared best practices in a podcast, with more content expected in future posts. Businesses can also subscribe to the Comply Connect newsletter for ongoing updates and guidance.
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