B-Notice

A B-notice is the notice a payer sends a payee after the IRS flags a name and TIN mismatch on a filed information return. The trigger is a CP2100 or CP2100A, which Publication 1281 defines as a notice that “tells a payer that he or she may be responsible for backup withholding.” The payer then passes the problem to the payee through a B-notice, named for the backup withholding (BWH-B) program it belongs to.

What Triggers a B-Notice

The chain starts when the IRS matches a filed Form 1099 against its records. When a name and TIN combination does not match, the IRS issues a CP2100 or CP2100A with a listing of the affected accounts. Publication 1281 notes that large volume filers receive a CD or DVD data file CP2100, mid-size filers a paper CP2100, and small filers a paper CP2100A. The payer compares the listing with its records, then sends a B-notice to each payee.

First B-Notice

For the first CP2100 or CP2100A on an account, Publication 1281 states the payer “must send the First ‘B’ Notice and a Form W-9 to a payee after you receive the first CP2100 or CP2100A Notice with respect to this account.” The outer envelope must be marked “IMPORTANT TAX INFORMATION ENCLOSED” or “IMPORTANT TAX RETURN DOCUMENT ENCLOSED.” The payee returns a certified TIN on the W-9, which the payer uses to correct its records.

Second B-Notice

A Second B-notice applies when the IRS sends a second CP2100 or CP2100A on the same account within a three-calendar-year period. Per Publication 1281, “the text of the Second ‘B’ Notice is different from that of the First ‘B’ Notice.” It tells the payee to contact the IRS or SSA to obtain a correct name and TIN, and “should not include a Form W-9.” Instead, the payer “must receive validation of the payee’s Name/TIN combination from SSA or IRS after sending the second ‘B’ Notice.” Publication 1281 adds that generally a payer does not send a B-notice more than two times within three calendar years to the same account.

Timing and Backup Withholding

Publication 1281 sets the deadline to send the B-notice at 15 business days from the date of the CP2100 or CP2100A or the date received, whichever is later. The IRS backup withholding page sets the rate at “the current rate of 24 percent,” which Publication 1281 confirms for subject payments after December 31, 2017. The payer must begin withholding no later than 30 business days after the CP2100 or CP2100A, and stops within 30 calendar days after receiving the W-9 certification or the SSA or IRS validation.

Common Pitfalls

• Confusing the CP2100 with the B-notice. The CP2100 or CP2100A goes from the IRS to the payer. The B-notice goes from the payer to the payee.
• Sending a Form W-9 with the Second B-notice. The second notice should not include a W-9. The payee validates the TIN through the SSA or IRS instead.
• Ignoring the tracking rule. The payer must track which notice is first or second per account, since the IRS does not state which one it is.

Related Terms

• Backup Withholding: the 24 percent regime a B-notice can lead into.
• TIN Matching: the IRS program that prevents CP2100 notices before filing.
• Taxpayer Identification Number: the SSN or EIN a B-notice asks the payee to confirm.

Omnivoo Contract Management collects and validates each contractor’s name and TIN before payment, reducing the CP2100 mismatches that pull a payer into the B-notice and backup withholding cycle.