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CP2100 and 2100A Notices: When Payers Need To Correct Backup Withholding Errors

CP2100 and 2100A Notices: When Payers Need To Correct Backup Withholding Errors

Banks, credit unions, corporations, and payers who filed returns that did not match IRS data receive CP2100 and CP2100A notices from the IRS.

These information returns include:

  • Form 1099-B, Proceeds from Broker and Barter Exchange Transactions
  • Form 1099-DIV, Dividends and Distributions

  • Form 1099-G, Certain Government Payments

  • Form 1099-INT, Interest Income

  • Form 1099-K, Payment Card and Third-Party Network Transactions

  • Form 1099-MISC, Miscellaneous Income

  • Form 1099-NEC, Nonemployee Compensation

  • Form 1099-OID, Original Issue Discount

  • Form 1099-PATR, Taxable Distributions Received from Cooperatives

  • Form W-2G, Certain Gambling Winnings

The IRS sends these notifications out twice a year, once in September and October and then again in April. The notices advise taxpayers that their information return is missing a Taxpayer Identification Number (TIN), has an inaccurate name, or both.

Each warning includes a list of payees who have TIN concerns. Payers must check the accounts specified on the notice against their account records and, if necessary, rectify or amend their records. Correcting backup withholding on payments sent to payees is one example.

The notifications also inform payers that backup withholding is their responsibility. Backup withholding applies to payments reported on the above-mentioned information returns if:

  • The payer doesn't have the payee's TIN when making the reportable payments.

  • For reportable interest, dividend, broker, and barter exchange accounts, the payee fails to certify their TIN.

  • The IRS informs the payer that the payee provided an erroneous TIN and that the payee failed to certify their TIN as required by the IRS.

  • Because the payee did not disclose all of their interest and dividends on their tax return, the IRS advises the payer to begin backup withholding.

Payers are liable for the amount they failed to withhold as backup, and sanctions may follow.

Please watch TFX webinar for more information on IRS letters or you can read the transcription of the Q&A session with our tax experts.   

Ines Zemelman, EA
Founder of TFX