What To Do If You Receive IRS Notice CP-2100A
The IRS uses Notice CP2100 and CP2100A to inform a payer that there are problems with taxpayer information numbers on Forms 1099 that have been filed and that you may be responsible for backup withholding. The most common reasons for receiving IRS Notice CP2100A include:
- There is a problem with the tax identification number (TIN) reported on Form 1099. The TIN does not match any TIN in the IRS database and/or
- There is a problem with the taxpayer’s name. The taxpayer’s name reported on Form 1099 does not match the IRS database and/or
- The TIN reported does not match the taxpayer’s name in the database.
In order to locate and resolve a mismatch between the TIN and taxpayer name, the IRS has a prescribed set of action steps that you need to follow once you’ve received one of these letters.
- Step 1. Compare the W-9 that the vendor provided to you previously with what was reported on Form 1099
- If you do not have a Form W9 on file, go to the next step
- If the information reported does not match the Form W9, update the information so that the correct information will be reported next year. No further action is required.
- If the information reported matches the Form W9 provided, go to the next step.
- Step 2-1st NOTICE. Determine if this is the first time you have received a notice on the payee, send the first B-notice (backup withholding notice) and a Form W-9 Request for Taxpayer Identification Number to the payee within 15 business days from the date of the CP2100 notice or the date of receipt whichever is later. The payee is required to fill out the W-9 and return it to you.
- If the payee does not respond within 30 days of the notice, begin backup withholding at a rate of 28% of all payments. The withholding continues until no later than 30 days after the payee submits a TIN that is able to be validated.
- Step 3-Issue 2nd Notice. If you have previously received a 2nd CP2100 notice within the last three calendar years, send the second B-Notice within 15 business days from the date of the notice. Clearly mark “IMPORTANT TAX INFORMATION ENCLOSED” on the outside of the mailing envelope. The second B-Notice tells the payee to contact the IRS or the Social Security Administration to obtain the correct name/TIN combination.
- Payee must provide a copy of his Social Security Card with his or her correct name and SSN. If the TIN is an EIN, the payee must contact the IRS to get his or her employer identification number validated on IRS Letter 147C.
- Step 4-Start Backup Withholding. If the payee does not respond within 30 days of the notice, begin backup withholding at a rate of 28% of all payments. The withholding continues until no later than 30 days after the payee submits a TIN that is able to be validated.
We recommend that you keep copies of all correspondence that you send to your payees to document your compliance with the IRS requirements.
For more information see PUB 1281 at https://www.irs.gov/pub/irs-pdf/p1281.pdf