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What Are The Reasons Behind 1099 Correction Notice?
Getting confused? Don’t worry! We will let you know what to do
if the IRS sends a 1099 Form correction notice. We will
explain the notice you received in detail by providing simple steps
you’re responsible for after receiving a correction notice.
Each year the IRS sends out B notices to the payers in the form
of CP2100 and CP2100A. These notices create a significant burden to
the payer who files a 1099 Tax Form. CP2100 or CP2100A notice tells
that the payer is responsible to withhold taxes under backup
withholding rules. Generally, the IRS issued this notice when the
payee’s TIN is missing, incorrect, or invalid. Filers who submit
more than 250 information returns receive CP2100 notice. Other
filers who submit fewer than 1099 Tax Forms less than 250
receive CP2100A notice.
What Are The Payments Subject To Backup Withholding?
Following are the payments subject to backup withholding:
Rents, royalties, gross proceeds paid to attorneys, determinable
gains, profits, or income reportable on Form 1099 MISC.
Interest income reportable on 1099 INT, and dividend income
reported on Form 1099 DIV.
Payment card and third-party network transactions reported on
1099 K.
Payments excluded from backup withholding include:
Real estate transactions, foreclosures, and abandonment.
Canceled debts, distributions from Medical Savings Accounts,
long-term care benefits.
Distributions from any retirement accounts, employee stock
ownership plan, fish purchases for cash.
Unemployment compensation, state or local income tax refunds,
qualified tuition plans, etc.
When Is A TIN Considered Missing Or Incorrect?
TIN is a nine-digit numeric code assigned to the individual to
track tax obligations as per the IRS guidelines. It may be an
Employer Identification Number, Social Security Number. A TIN is
considered to be missing if:
It has more or less than nine digits.
Anyone digit consists of alpha characters.
It is not provided.
Example of incorrect or missing TINs:
Missing SSN: 123-45-678/;In the above example, the last digit in
the SSN is missing. Correct SSN will be 123-45-6789 format.Missing
EIN:12-345678p;In the above example, the last digit in the EIN is
“missing”. Correct EIN will be “12-3456789”.Incorrect TIN: If the
name/TIN doesn’t match with the IRS database.
When Do You Send A B Notice To A Payee?
You need to send a B notice to the payee within 15 business days
from the CP2100 or CP2100A Notice date. In general, you don’t have
to send a B notice to the same payee more than two times in three
calendar years. Furthermore, if you’re sending a second B notice to
the payee, make sure not to include W-9 Form. As mentioned earlier,
the payees must identify the difference between the first B notice
and the second B notice. The payee is responsible to provide the
correct TIN with name matching in the IRS database. Otherwise, the
payer can start backup withholding of 24% from certain payments.
Failure to follow backup withholding rules results in penalties to
the payer.
Mistakes are common when you file Form 1099 at the last minute.
Form 1099 Online provides instant audit checks to eliminate
last-minute filing errors. Create a free e-file account today with
us and e-file 1099 Tax forms in minutes.
Contact Details:
Form1099Online
P.O.BOX-67208,
1749 N Roosevelt Ct, Wichita, KS
Call: +1 316-869-0948
Email: [email protected]
www.form1099online.com