RS 1099 matching is the process the IRS uses to compare 1099 forms against the information reported on individual tax returns. The goal is to ensure that businesses, contractors, and other taxpayers accurately report all taxable income. The system, known as the Automated Underreporter (AUR) Program, cross-checks 1099 filings with tax return data to flag discrepancies. If mismatches are found, the IRS may issue a CP2000 notice, which can result in added taxes, interest, and penalties.
How IRS 1099 Matching Works
Each year, financial institutions, employers, and businesses file 1099 forms with the IRS. These forms report payments made to contractors, freelancers, and investors. Common examples include:
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Form 1099-NEC for nonemployee compensation
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Form 1099-MISC for miscellaneous payments
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Form 1099-DIV for dividends
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Form 1099-INT for interest income
The IRS then uses Social Security Numbers (SSNs) or Taxpayer Identification Numbers (TINs) to match these payments with what the taxpayer reports on their return. If there’s a discrepancy, the return is flagged for review.
👉 Learn more about TIN Matching and error prevention.
What Happens If There’s a Mismatch?
If IRS 1099 matching finds income that wasn’t reported, the AUR system may trigger an official response. In most cases, the IRS will:
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Send a CP2000 notice outlining the discrepancy
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Propose adjustments to the taxpayer’s return
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Assess additional taxes, interest, and penalties
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Allow the taxpayer to respond with corrections or documentation
It’s important to note that a CP2000 notice is not an audit. However, failure to respond can lead to automatic tax assessments, making quick action essential.
How to Avoid IRS 1099 Matching Issues
To reduce the risk of errors and penalties, businesses and taxpayers should:
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Verify TINs before filing – Use the IRS Bulk TIN Matching system or work with a provider like 1099FIRE.
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File electronically – E-filing reduces common mistakes compared to paper forms. See our 1099 electronic filing software.
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Keep accurate records – Save contracts, invoices, and payment confirmations.
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Respond promptly – If you receive a CP2000, reply quickly with supporting documentation.
Why IRS 1099 Matching Matters
The IRS 1099 matching program is one of the most effective tools the IRS uses to enforce compliance. Even small mistakes, such as a typo in a name or TIN, can cause rejections or trigger backup withholding obligations. By preparing ahead of time and using compliance software, you can minimize risk and stay ahead of IRS notices.
👉 Explore more about how to prevent 1099 filing errors.