How Sovos Can Help with Transmitter Control Codes (TCCs)

This blog was last updated on December 18, 2023

Earlier this month, I again connected with the media outlet PYMNTS to discuss important tax information reporting updates that businesses must be mindful of going into the next reporting season. Transmitter control codes (TCCs) are digital IDs that the IRS issues to businesses that need to transmit various information returns, including 1099s. However, many IRS systems are being modernized making sweeping changes to access credentials to a variety of IRS systems, and TCCs are no exception.

Let’s review some of the key takeaways from my chat with PYMNTS, and how Sovos can help organizations stay compliant with transmitter control codes and their filing needs.

What’s the big deal?

If any business wants to file information returns, such as a Form 1099 or Form 1042-S, it must have a TCC. These are issued by the IRS and identify who is transmitting information returns to the IRS. To obtain a TCC, previously an organization would submit a form to the IRS and then wait for a letter with the information to be sent back. That number would then be used to file in whichever system was needed (e.g., FIRE, AIR, Modernized e-File).

However, the mechanics are changing. Due to fraud issues, the IRS has been focusing on improving authentication methods for who is accessing their business systems. Instead of a paper form, the IRS has implemented the IR Application for TCC. To get in, you need to set up an account in one of the government’s verification systems, such as ID.me.

It’s not as easy as 1-2-3

It’s important to note that businesses also need an e-Services account – a portal that gives you access to a variety of IRS systems. Once that process is complete, organizations must establish/designate responsible officers and principals for the business. These individuals are required to be a licensed bar attorney, CPA or an enrolled agent with the IRS or go through a background check. For example, Sovos had to have an employee be fingerprinted as part of the background check to be credentialed so we could file on behalf of our customers.

What if I don’t get a new TCC?

I can’t stress this enough: all businesses that must file 1099 information returns will need an active and valid TCC. This process to move from the paper process to IR Application for TCC actually started over one year ago. Many organizations already had TCCs – Sovos had over 100 for clients that we file for. However, some of those TCCs may have been set up under old entity names or were perhaps under a long company name that got abbreviated. By moving away from the paper system, people were running into issues where the IRS couldn’t identify who they were because of mismatches in how the IRS migrated their legal names versus what was being used to access the new TCC system.

Another issue with company-specific information being migrated away from the paper form and into the online app is that all of the filing-specific details were not also necessarily accurately moved. For example, Sovos found that some of our TCC codes were not approved to participate in the Combined Federal State Filing (CF/SF) program, even though we had been successfully participating in that program using that TCC for years.

The most concerning issue is that the process is long. The IRS tells you it can take, “up to 45 days” but I’ve heard people are waiting up to 60 days, which can be disconcerting given the first 2023 filing requirement is in less than 30-days.

The bottom line

As of August 1, 2023, the IRS decommissioned existing TCCs that had not been “reactivated” in the new online app. Businesses were supposed to go in, get the ID.me account, login to the IR Application for TCC with those credentials and “re-establish” your TCC and attach an identity to that number. If this didn’t happen, the IRS website indicated that they will not accept data using those old TCC credentials for 2023 and beyond. Businesses can’t take the risk and hope that their old TCC still works. If you didn’t go through that process by August 1, you should be applying for a new one in the online app. Or better —  looking for a third-party, like Sovos, for assistance.