I received a notice related to Form 1099-K

You received one or more of these letters and notices because you may have underreported your gross receipts. This is based on your tax return and Form(s) 1099-K, Payment/Merchant Cards and Third Party Network Transactions that show an unusually high portion of receipts from card payments and other Form 1099-K reportable transactions. It is very important that you respond to the IRS.

Here are some tips to help you in addressing the inquiry.

  • Read the notice thoroughly and complete any worksheets.
  • Gather your tax records including the 1099-Ks that you have received and determine if you agree with the notice about the underreporting of gross receipts.
  • If you have questions, use the contact information provided on the notice.

Form 1099-K is an information return that reports payment card and third party network transactions. You should retain it for your records and use it to assist you in completing your tax return. IRS will send a notice if it believes you owe additional tax or are due a larger refund, or if there is a question about your tax return.

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Fall 2013 B Notices: Notice 1430 – Information about Your Form 1099-K (august 2013)

Why you are receiving this notice?
Your name and taxpayer identification number (TIN) submitted on Form 1099-K,Payment Card and
Third Party Network Transactions,
by a payment card processor or third-party settlement organization
does not match IRS records. If a payment card processor or third-party settlement organization
submits a Form 1099-K for tax year 2013 with an incorrect TIN or name for you, the payments you
receive for your payment card or third party network transactions will be subject to backup
withholding. This means the payment card processor or third-party settlement organization will be
required to withhold 28% from each payment to you beginning as early as September 2014.
If you operate as a partnership or subchapter S corporation, any monies withheld due to an incorrect
name or TIN can only be claimed by the partners and shareholders on their individual income tax
returns for their shares of the withheld amounts. The monies are not refundable to the partnership or
subchapter S corporation.
What you need to do
You need to immediately contact your payment card processor or third-party settlement organization.
Verify that the name and TIN the payment card processor or third-party settlement organization has in
its records matches the exact name and TIN on your income tax return.
For additional information on Form 1099-K reporting and backup withholding, visit our website at
www.irs.gov
and enter keywords, “Third Party Reporting Center” or “Backup Withholding.”

Penalty Relief and Schedule for ‘B’ Notices for Payment Card and Third Party Network Transactions

Internal Revenue Bulletin:  2013-39  -  Notice 2013-56

Transitional Penalty Relief and Schedule for Notices of Incorrect Name/TIN Combinations for Information Returns Relating to Payment Card and Third Party Network Transactions

Notice 2013- 56 provides transitional relief from penalties for a section 6050W filer reporting incorrect taxpayer identification number (TIN) information on information returns (Form 1099-K) and payee statements filed under section 6050W of the Internal Revenue Code. The relief provided by this notice is available for certain errors on information returns and payee statements required to be filed or furnished in 2013, based on payments made in calendar year 2012, as well as certain returns and statements that are required to be filed or furnished in 2014, based on payments made in calendar year 2013, provided that the section 6050W filer makes a good faith effort to accurately file the appropriate information return and the accompanying payee statement.

In addition, this notice informs section 6050W filers that Internal Revenue Service (IRS) notices informing payors that payee name and TIN combinations are incorrect (CP2100/CP2100A Notices) will not be sent based on incorrect name and TIN combinations on Forms 1099-K due before January 1, 2014. The first CP2100 and CP2100A Notices with respect to payments subject to section 6050W will be sent in late 2014 based on incorrect name and TIN combinations on Forms 1099-K filed in 2014 for calendar year 2013 payments.

Penalty Relief

Sections 6721 and 6722 are applicable to section 6050W payors that must file information returns for payments made in settlement of reportable payment transactions. Prior to the enactment of section 6050W, payors were not required to file the specific type of information return or to furnish the specific type of payee statement now required by section 6050W. In order to provide additional time to develop appropriate procedures for compliance with these new reporting requirements, Notice 2011-89 provided that the IRS would not impose penalties under sections 6721 and 6722 on payors that must file information returns and furnish payee statements in 2012 based on payments made in calendar year 2011, provided that they make good-faith efforts in filing accurate Forms 1099-K and furnishing the accompanying payee statements. Since that time, the IRS has been made aware that payors subject to section 6050W reporting continue to experience greater than usual difficulty in obtaining correct name and TIN information from payees and in resolving name and TIN mismatches. Payors have requested additional transition penalty relief in order to enable them to resolve these issues.

After careful consideration of these comments, the Treasury Department and the IRS have decided to extend the penalty relief provided in Notice 2011-89 to certain errors on information returns and payee statements required to be filed and furnished in 2013 and 2014. Specifically, this notice provides relief from penalties under sections 6721 and 6722 for returns and statements required to be filed and furnished in 2013 based on payments made in calendar year 2012 if they have missing TINs, obviously incorrect TINs (as described in section 3406(h)(1))[1], and incorrect name and TIN combinations. In addition, this notice provides relief from penalties under sections 6721 and 6722 for returns and statements required to be filed and furnished in 2014 based on payments made in 2013, but only in cases where the 2013 Form 1099-K contains an incorrect name and TIN combination. Limiting penalty relief for 2013 Forms 1099-K to incorrect name and TIN combinations is warranted because more expansive penalty relief (i.e., relief from penalties for missing or obviously incorrect TINs) would be inconsistent with the payor’s backup withholding obligations, which were first effective for payments made on or after January 1, 2013.

This notice does not apply to a payor who erroneously fails to file an information return or payee statement.

Schedule for CP2100/CP2100A Notices

Payors have asked for guidance regarding when the IRS will begin sending CP2100/CP2100A Notices with respect to Forms 1099-K. This notice informs payors that the IRS will not issue CP2100/CP2100A Notices based on incorrect name and TIN combinations reported on Forms 1099-K due before 2014. The IRS will begin sending CP2100/CP2100A Notices with respect to Forms 1099-K in late 2014. These CP2100/CP2100A Notices will be based on incorrect name and TIN combinations reported on Forms 1099-K required to be filed in 2014 for calendar year 2013 payments.

CP2100/CP 2100A Notices are not necessary to trigger backup withholding if the payee either did not provide a TIN or provided an obviously incorrect TIN. Payors should continue to backup withhold on calendar year 2013 payments to payees who failed to provide a TIN or who provided an obviously incorrect TIN.

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Second B Notice Sample

Second B Notice
IMPORTANT TA X NOTICE ACTION IS REQUIRED
Second Backup Withholding Warning!
YOU MUST HAVE THE IRS OR SSA VALIDATE YOUR TA XPA YER IDENTIFICATION NUMBER AND
RETURN IT TO US: ________________________________. Otherwise, backup withholding will begin.
Account Number
Current Name on Account
Current TIN on Account

We have received notice from the Internal Revenue Service (IRS) twice within 3 years stating that the
combination of the name and taxpayer identification number (Name/TIN combination) on your account with us
is incorrect. (Your account number, current name on the account, and current taxpayer identification number
(TIN) on the account are shown above.) A Name/TIN combination is incorrect if it does not match a Name/TIN
combination shown on the records of the Social Security Administration (SSA) or the IRS.
You should follow the instructions below to correct this problem and send the corrected information to us
before the date shown above. If we do not have the correct information before that date, the law requires us
to backup withhold on interest, dividends, and certain other payments that we make to your account. The
backup withholding rate is: __ [set forth rates/dates]
Section 3406 of the Internal Revenue Code requires that we withhold a predetermined percent in tax, called
backup withholding, when you do not give us your correct Name/TIN combination. Because of the notices
we received from the IRS, we are now required to disregard any future Name/TIN combinations you furnish us
for your account (whether or not you certify your TIN under penalties of perjury) unless SSA (or, in the case of
an incorrect employer identification number, the IRS) validates your Name/TIN combination. Also, the IRS may
charge you a $50 penalty for failing to provide us with your correct Name/TIN combination.

What You Need To Do for individuals
Follow the instructions below to correct your account record to avoid backup withholding on your account (or
to stop it once it has begun) and to avoid the penalty.

Individuals
Instructions for Incorrect Social Security Numbers
If the incorrect TIN you furnished us is a social security number, you must:
1. Contact your local SSA office to secure a Social Security Number Printout.
2. Give a copy of this notice to the SSA; and
3. Request a Social Security Number Printout from the local Social Security Administration Office. Send
the Social Security Number Printout directly to us with a copy of this notice attached.

Non- individuals or Certain Sole Proprietors
Instructions for Incorrect Employer Identification Numbers
If the incorrect TIN you furnished is an employer identification number, you must:
1. Write the Internal Revenue Service Center where you file your income tax return, and ask the IRS to
send you a Letter 147C;

2. Enclose a copy of this notice in your letter to the Internal Revenue Service Center; and
3. When the IRS sends you the Letter 147C, send it to us with a copy of this notice attached

Source: Publication 1281,Page 21

First B Notice Sample

First B Notice
IMPORTANT TA X NOTICE ACTION IS REQUIRED
Backup Withholding Warning!
We need a Form W-9 from you before: _______________________. Otherwise; backup withholding
will begin on
Account Number
Current Name on Account
Current TIN on Account
The Internal Revenue Service (IRS) has notified us that the taxpayer identification number (TIN) on your
account with us does not match its records. The IRS considers a TIN as incorrect if either the name or number
shown on an account does not match a name and number combination in their files or the files of the Social
Security Administration (SSA). If you do not take appropriate action to help us correct this problem before the
date shown above, the law requires us to backup withhold on interest, dividends, and certain other payments
that we make to your account. The backup withholding rate is: __ [set forth rates/dates] In addition to
backup withholding, you may be subject to a $50 penalty by the IRS for failing to give us your correct Name/
TIN combination. This notice tells you how to help us make your account records accurate and how to avoid
backup withholding and the penalty.
Why Your TIN May Be Considered As Incorrect.
An individual’s TIN is his or her social security number (SSN). Often a TIN does not match IRS records
because a name has changed through marriage, divorce, adoption, etc., and the change has not been
reported to SSA, so it has not been recorded in SSA’s files. Sometimes an account or transaction may not
contain the correct SSN of the actual owner. For example, an account in a child’s name may reflect a parent’s
SSN. (An account should be in the name and SSN of the actual owner.)
What You Need To Do for Individuals
If you have never been assigned a social security number (or if you lost your social security card and do not
know your SSN), call your local SSA office and find out how to obtain an original (or a replacement) social
security card. Then apply for it. If you already have a social security number: Compare the name and SSN
on your account with us (shown at the beginning of this notice) with the name and SSN shown on your social
security card. Then use the chart on the next page to decide what action to take.

 

Source: Page 18, IRS publication 1281

IRS Publication 1281

Here is link to IRS Publication 1281 - which covers Backup Withholding for Missing and Incorrect Name/TINs.

TABLE OF CONTENTS
Part 1- Introduction
• Backup Withholding Rate/Effective Dates 3
Part 2 – Frequently Asked Questions 4
Part 3 – Where to Call for Help 9
Part 4 – Actions for Missing TINs and Incorrect Name/TIN Combinations 10
• CP2100 Notice 10
• Missing TIN(s) 10
• Incorrect Name/TIN Combinations 10
• First “B” Notice 12
• Second “B” Notice 13
• Third and Subsequent Notices 13
Part 5 -The IRS Matching Process/ Name Controls 14
Part 6 -Flow Charts 16
• First “B” Notice Copy 18
• Second “B” Notice Copy 21
Part 7- Name Compression Specifications for “B” Notice Tape Cartridges 22
Part 8 – Instructions for Reading Tape Cartridges 23
Part 9 – Instructions for Reading CD/DVD media 26
Part 10 – Other Forms 30
• Instructions for the Requester of Form W-9
• Form W-9
• Form W-8 Series and Instructions

 

 

B notice Q&A

Publication 1281

What is a “B” Notice?
AA… A “B” Notice is a backup withholding notice. There are two “B” Notices — the First “B” Notice and the Second “B” Notice. You must send the First “B” Notice and a Form W-9 to a payee after you receive the first CP2100 or CP2100A Notice with respect to this account for soliciting a correct Name/TIN combination. You must send the second “B” Notice to a payee after you receive a second CP2100 or CP2100A Notice within a 3 calendar year period. The text of the Second “B” Notice is different from that of the First “B” Notice. The Second “B” Notice tells the payee to contact IRS or SSA to obtain the correct Name/TIN combination. The mailing of the second notice should not include a Form W-9. The payee must certify the Name/TIN combination after receiving the second “B” Notice. Generally, you do not have to send a “B” Notice more than two times within three calendar years to the same account.

Q… When do I send a “B” Notice to a payee?
AA… You have 15 business days from the date of the CP2100A or CP2100 Notice, or the date you received it (whichever is later), to send a “B” Notice to a payee. For incorrect TINS you only have to send a “B” Notice to a payee whose Name/TIN combination and account number on your records agrees with the combination that IRS identified as incorrect.

Q… How do I know which “B” Notice to send?
AA… If this is the first CP2100 or CP2100A Notice you have received with respect to this account, you must provide the payee with (1) the First “B” Notice and (2) a copy of Form W-9 (or acceptable substitute). You may also provide an optional reply envelope. Your outside mailing envelope must be clearly marked “IMPORTANT TA X INFORMATION ENCLOSED” or “IMPORTANT TA X RETURN DOCUMENT ENCLOSED.”
If this is the second CP2100 or CP2100A Notice you have received within three calendar years with respect to this account, you must provide the payee with the Second “B” Notice. Do not include a Form W-9. You may also provide an optional reply envelope. Your outside mailing envelope must be clearly marked “IMPORTANT TA X INFORMATION ENCLOSED” or “IMPORTANT TA X RETURN DOCUMENT ENCLOSED.”

Q… Do I have to mail a Second “B” Notice if I receive the second CP2100 or CP2100A Notice in the same calendar year as the first notice?
AA… No. You may disregard the second CP2100 or CP2100A notice, even if it relates to a different tax year than the first notice. You also have no obligation to mail a second ‘B’ Notice if you receive the second CP2100 or CP2100A Notice in a different calendar year than the first, but both of the CP notices relate to the same payee’s account for the same calendar year.

Q… What should I do if a “B” Notice is returned as “undeliverable”?
AA… You must begin backup withholding. However, try to get the correct address for the payee and re-mail the notice. If you cannot find the correct address, keep the undelivered notice with your records for a period of three years, in order to track the “two-in-three-year” rule or, until you have obtained a valid address.

Q… After I receive a CP2100 or CP2100A Notice, when do I start and stop backup withholding?
AA… You must backup withhold on all reportable payments to the payee 30 business days after you have received the CP2100 or CP2100A Notice. You must stop backup withholding on payments within 30 calendar days after you have received the required certification (Form W-9) from the payee or TIN validation from the SSA or the IRS, if it was a second notification. At your option, you may start and stop backup withholding at any time during these 30-day periods.

Q… What are the first and second annual solicitation requirements?
AA… A solicitation is a request for a payee’s correct TIN. You must make the request to satisfy the backup withholding requirements and to avoid a penalty for filing another information return with a missing or an incorrect TIN. The payee must furnish a certified TIN (initial solicitation) on Form W-9 with respect to payments of interest, dividends, and amounts subject to broker reporting. For other payments, the payee may furnish/provide the TIN in any manner.
For missing TINs: For all payees you must make the initial solicitation when the payee opens the account or when the transaction occurs. If the payee does not provide a TIN when you initially ask for it, you must begin backup withholding. In addition, to avoid a penalty for filing an incorrect information return, you must make a first annual solicitation by December 31 of the year in which the account is opened (for accounts opened before December) or January 31 of the following year (for accounts opened during the preceding December). If the payee does not provide a TIN after the first annual solicitation, you must make the second annual solicitation by December 31 of the year following the calendar year in which the account was opened.
For incorrect TINs: You must make up to two annual solicitations in response to the CP2100 or CP2100A Notice. You must send a B Notice within 15 business days after you receive a CP2100 or CP2100A Notice. If you receive a Proposed Penalty Notice (972CG) but not a CP2100 or CP2100A Notice, your annual solicitation must be made by December 31st of the year you received the Proposed Penalty Notice (972CG).
However, if you already sent a B Notice in the calendar year in response to a CP2100 or CP2100A Notice, you do not have to send another solicitation in response to the proposed penalty notice. If the IRS notifies you in the next calendar year that a TIN is still incorrect, you must make a second annual solicitation within 15 business days after you receive the second CP2100 or CP2100A Notice.

Q… Does a CP2100 or CP2100A Notice indicate whether it is the first or second notification of an incorrect TIN for a specific account?
AA… No. The backup withholding regulations require that payers be responsible for tracking the status of the notices they receive.

Q… What is the relationship between the requirements to make an annual solicitation for a payee’s TIN and the requirements to send a “B” Notice?
AA… Sending a “B” Notice to a payee in response to a CP2100A or CP2100 Notice satisfies the annual solicitation requirement in order to avoid a penalty for filing an information return with an incorrect TIN.

Q… Why are accounts I corrected still on the listing of missing or incorrect TIN(s)?
AA… Due to processing cut-off points, a listing may or may not reflect your latest corrections. If you know that an account was corrected, do not send a “B” Notice to the payee.

Q… What should I do if a TIN was actually on file but was omitted from the Form 1099 or reported incorrectly?
AA… Make any required change to your records and use the correct information on future filings. Do not send a “B” Notice to the payee.

Q… What should I do if this is the first notification and the Form W-9 is returned with the same incorrect information?
AA… Keep the Form W-9 on file to show that the payee certified the Name/TIN combination. Do not backup withhold.

Q… If I don’t do business anymore with a payee, or if it was only a one-time transaction, what should I do with the “B” Notice?
AA… Send it and try to get the correct TIN. Also, note your records to track the notice for the “two-inthree year” rule. You will need this information if you should renew business with the payee. We require that you track these accounts for three years after the date of the first CP2100A or CP2100 Notice.
Note: A “B” Notice is not required if no payments have been made to an account and no return is required for the account for one year.

Q… Can a sole proprietor have an SSN or does he or she need an EIN?
AA… A sole proprietor may have an SSN or an EIN. However, he or she must always furnish his or her individual name (on Name Line 1), regardless of whether he or she uses a SSN or an EIN. A sole proprietor may also provide a business name or Doing Business As (DBA) (on Name Line 2), but he or she must list his or her individual name first on the account with you.
.

Q… Should I backup withhold on a payee who is a nonresident alien?
AA… Yes. A nonresident alien is subject to backup withholding unless you have a signed Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, on file for him or her.

Q… Can a Form W-9 for one account be used to correct all accounts?
AA… Yes, if the payer required a payee to file only one Form W-9 for all accounts or instruments of the payee.

Q… Can a payee be subject to backup withholding for more than one reason?
AA… Yes. However, backup withhold for only one reason at a time.

Q… How do I get an EIN?
AA… Complete Form SS-4, Application for Employer Identification Number. Follow “How to Apply” in the instructions for Form SS-4 to obtain an EIN by mail, telephone, or facsimile (fax).

Q… What form do I use to report backup withholding?
AA… Report backup withholding on Form 945, Annual Return of Withheld Federal Income Tax. For more information, including the deposit requirements for Form 945, see the instructions for Form 945, or
Pub. 15, (Circular E), Employer’s Tax Guide.

Q… How is a Name/TIN mismatch identified?
AA… A Name/TIN combination is incorrect if it does not match, or cannot be found, on IRS or SSA files.
For example, a Name/TIN mismatch occurs when an individual name is submitted with a TIN not associated with the individual name provided. A TIN is not interchangeable with different names.
A business EIN must be used for a partnership, corporation, or non-disregarded Limited Liability Company (LLC). An SSN must be used with an individual name (In first name line). A Sole Proprietor must always provide his/her individual name. A Sole Proprietor may provide his/her Doing Business As (DBA) name (in second name line) in addition to the required individual name together with the matching SSN.

Q… What amount is subject to backup withholding with respect to security sales made through margin accounts?
AA… The amount subject to backup withholding in the case of a security sale made through a margin account is limited to the amount of cash available for withdrawal by the customer immediately after the settlement of the sale. The amount available for withdrawal by the customer does not include amounts required to satisfy margin account maintenance. If a margin call forces a customer into a sell – off, such proceeds are not subject to backup withholding.

Q… In what manner should a payer treat erroneously withheld tax?
AA… If a payer withholds from a payee in error or withholds more than the correct amount of tax, the payer may refund the amount improperly withheld. The refund must be made prior to the end of the calendar year and prior to the time the payer issues a Form 1099. If the payer has not deposited the amount of the tax prior to the time that the refund is made to the payee, the payer should not deposit the improperly withheld tax. If the improperly withheld tax has been deposited prior to the time the refund is made to the payee, the payer may adjust any subsequent deposit of tax collected, which the payer is required to make, by the amount of the tax which has been refunded to the payee. Payers may use refund alternatives only when backup withholding is the result of an error by the payer. The timely submission of requested TIN information inincluding any verifications and/or certifications by the payee does not establish an error by the payer.

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Backup Withholding for Missing and Incorrect Name/TIN(s) Publication 1281

Publication 1281

What payments are subject to backup withholding?
a) Rents and commissions, non-employee compensation for services, royalties, reportable gross
proceeds paid to attorneys and other fixed or determinable gains, profits, or income payments
reportable on Form 1099-MISC, Miscellaneous Income.
b) Interest reportable on Form 1099-INT, Interest Income.
c) Dividends reportable on Form 1099-DIV, Dividends and Distributions.
d) Patronage dividends paid in money or qualified check reportable on Form 1099-PATR, Taxable
Distributions Received From Cooperatives.
e) Original issue discount reportable on Form 1099-OID, Original Issue Discount, if the payment is in
cash.
f) Gross proceeds reportable on Form 1099-B, Proceeds From Broker and Barter Exchange
Transactions.
g) Gambling winnings reportable on Form W-2G, Certain Gambling Winnings, unless subject to
regular gambling withholding

 

When is a TIN considered missing or incorrect?
Missing TIN – We consider a TIN to be missing if it is not provided, has more or less than nine
numbers, or it has an alpha character as one of the nine positions.
Example: Missing SSN: 123-45-678
Example: Missing SSN: 123-45-67899
Example: Missing EIN: 12- 345678P
Incorrect TIN – We consider a TIN incorrect if it is in the proper format but the Name/TIN
combination does not match or cannot be found on IRS or SSA files.
Examples of Proper Format:
Correct SSN:123-45-6789
Correct EIN: 12-3456789

 

 

B Notice

A “B” Notice is a backup withholding notice. There are two “B” Notices — the First “B” Notice and the Second “B” Notice. You must send the First “B” Notice and a Form W-9 to a payee after you receive the first CP2100/CP2100A Notice with respect to this account for the purpose of soliciting a correct name/TIN combination.

The text of the Second “B” Notice is different than that of the First “B” Notice. It tells the payee to contact IRS or SSA to obtain the correct name/TIN combination. The mailing of the second notice should not include a Form W-9. You must send the second B Notice after receiving the second CP2100 or CP2100A with respect to this account. The payee must certify the Name/TIN combination after receiving the second “B” Notice. Generally, you do not have to send a “B” Notice more than two times within three calendar years to the same account.

Read more about B notices on IRS website