The first move
Send the B notice to the payee within 15 business days of receiving the CP2100, and keep proof you sent it. That step is what protects you from the penalty.
What these letters have in common
A CP2100 or CP2100A lists 1099s you filed where the payee's name and TIN did not match. Your job is to send each listed payee a B notice asking for a corrected Form W-9. If they do not respond within 30 business days, you must begin backup withholding at 24 percent on future payments. A second mismatch for the same payee within three years requires them to get a validation letter from the IRS or Social Security before withholding stops.
CP531 through CP546 deal with the withholding itself and with the payer's compliance. The penalty for not acting is the information return penalty plus liability for the tax that should have been withheld.
What to gather
- The CP2100 with the list of mismatched payees
- Your copies of the 1099s in question
- Form W-9 you have on file for each payee
- Your B notice template and mailing proof
How to write back
Letters in this family are usually answered by phone, online, or with the specific form the notice names rather than a letter. Where a written response helps, the document cover letter covers it.
Notices in this family
| Notice | What it means |
|---|---|
| CP2100 | Payee name and TIN mismatches on information returns you filed (large filers) |
| CP2100A | Payee name and TIN mismatches on information returns you filed (small filers) |
| CP531 | Backup withholding correspondence |
| CP538 | Backup withholding: notice to a payee |
| CP539 | Backup withholding: notice to a payee |
| CP540 | Backup withholding correspondence |
| CP541 | Backup withholding correspondence |
| CP542 | Backup withholding correspondence |
| CP543 | Backup withholding correspondence |
| CP544 | Backup withholding correspondence |
| CP545 | Backup withholding correspondence |
| CP546 | Backup withholding correspondence |
When to get help
A large payee list or a second B notice cycle for the same payee is a job for a payroll or accounts payable specialist.
Before you send anything
This is general information, not tax advice. Situations differ. Check with your tax advisor before you send anything. Nothing on this page creates a client relationship.
Sources
- IRS, Backup withholding
- IRS, Publication 1281