Purpose of IRS Letter CP2100A
The CP2100A informs the payer about:
- Incorrect TINs: The IRS has identified TIN/name mismatches, which could be due to errors in reporting, typos, or the use of incorrect names or TINs.
- Backup Withholding Requirement: If a payee (the individual or entity paid) has an incorrect TIN, the payer may need to begin backup withholding at the current IRS rate (24%) on future payments to the payee until the correct TIN is obtained.
Key Steps for the Payer upon Receiving a CP2100A
- Review the Listed Accounts: The letter includes a list of payees with incorrect TINs, so review and verify each account.
- Send a “B Notice” to the Payee: The IRS requires the payer to notify each payee about the TIN mismatch by sending them a “B Notice,” which requests the correct TIN and instructs the payee to update the information.
- Begin Backup Withholding if Necessary: If the payee does not provide the correct TIN, the payer may need to start backup withholding on future payments to the payee.
- Update Records: When corrected TINs are received from payees, update records accordingly to avoid future mismatches.
Avoiding Future CP2100A Letters
To prevent future issues, businesses should:
- Ensure accurate TIN and name records for all payees.
- Verify TINs using IRS TIN matching tools before submitting Form 1099s.
- Regularly audit records to ensure accuracy.
Receiving a CP2100A is a common administrative issue but needs to be addressed promptly to avoid penalties and ensure tax reporting compliance.
