B notice Q&A
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.