Effectively Handling CP 2100 letter and B Notices

Nervously awaiting your CP2100 Report from the IRS?

Collecting and organizing all the needed documentation to show where you’ve mailed W-9s and corrected your 1099s, all while trying to stay current with the ever-changing rules and regulations can be extremely stressful – especially with potential IRS fines hanging over your head.

Businesses receive a form called CP-2100 from the IRS when there's a mismatch between what the business put on a Form 1099 for a contractor's social security number, versus what's in the IRS's database for the contractor's social security number.

If a payer receives a CP2100 notice indicating a missing or incorrect payee TIN, they could potentially be responsible for backup withholding. Mandated by the IRS under Internal Revenue Code §3406, backup withholding rules require payers to withhold 28% of payments made to these payees, which is remitted to the IRS via Form 945, Annual Return of Withheld Federal Income Tax.

• To analyze what is a CP-2100 letter.
• To investigate how to use "B Notices".
• To explain the concept of backup withholding
• To analyze what is a Form W-9.
• To inspect how to use the IRS's TIN Matching Program.

• What is a CP-2100 letter?
• IRS Publication 1281 - a great resource for how to deal with CP-2100 letters.
• What is backup withholding?
• Understanding Form W-9.
• IRS "TIN matching" program.
• How to handle not getting an SSN from a contractor.

When a business receives a CP-2100 notice, it must send out what's called a "B Notice" to the contractor, to request corrected information. Effectively handling CP-2100 letters and sending out B Notices helps a business stay in compliance and avoid penalties. how to deal with CP-2100 letters, and also provide tips on avoiding these letters.

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Jason Dinesen is the President of Dinesen Tax & Accounting, P.C., a public accounting firm in Indianola, Iowa. His practice focuses on accounting and bookkeeping services, tax preparation and business advising to individuals with a business focus ranging from home-based businesses to multistate corporations and not-for-profits. Dinesen has extensive experience working with a third-party administrator of retirement plans and is a prior presenter of multiple 1099 seminars. Dinesen majored in corporate communications with a minor in management from Simpson College