Notices CP2100 and CP2100A are known as “Backup Withholding Notices” and are sent when a payee’s name or Taxpayer Identification Number (TIN) does not match the records of the IRS.
An IRS B-Notice is a letter a payer sends to a payee, typically formatted as a formal notice. The payer is responsible for creating and issuing the notice, so the appearance can vary slightly depending on the payer’s practices. However, it should adhere to IRS requirements and include specific details to ensure compliance. Below is a breakdown of what a B-Notice typically looks like:
Key Components of a B-Notice
- Header:
- Include the payer’s name, address, and contact information.
- Date of the notice.
- A reference to the specific tax year in question.
- Salutation:
- Address the payee by their legal name as recorded in the payer’s files.
- Opening Statement:
- Inform the payee of the IRS-identified mismatch between the TIN and name submitted on an information return (e.g., Form 1099).
- Reference the IRS notification (CP2100 or CP2100A) that prompted the B-Notice.
- Instructions to the Payee:
- For a First B-Notice:
- Request the payee to complete and return a new Form W-9 (Request for Taxpayer Identification Number and Certification).
- Include a deadline (usually 30 days from the date of the notice) for the payee to respond.
- For a Second B-Notice:
- Inform the payee that they must contact the IRS to obtain a TIN validation letter (Form 147C) and provide it to the payer.
- Specify the response deadline.
- For a First B-Notice:
- Consequences of Non-Compliance:
- Clearly state that if the payee does not respond, the payer is required by law to begin backup withholding at 24% on future payments.
- Mention that backup withholding will continue until the issue is resolved.
- Attachments:
- Include a blank Form W-9 with instructions (for the First B-Notice).
- Include relevant IRS documentation if needed (e.g., instructions on how to obtain Form 147C for the Second B-Notice).
- Closing:
- Provide a contact number or email for questions.
- Encourage prompt action to avoid withholding.
- Signature:
- Include a representative’s name and title, or the name of the department managing tax compliance.
Example Template for a First B-Notice
Second B-Notice Specifics
For a second B-Notice, modify the text to inform the payee that they must contact the IRS directly to resolve the mismatch. Include instructions about obtaining Form 147C, and omit the Form W-9.
If you need assistance drafting a customized B-Notice for your organization, let me know!
