CP2100A Notice: What It Is and How to Respond
Understand the IRS CP2100A notice, a request to correct payee data. This guide outlines the required response to ensure accurate information reporting.
Receiving a notice from the Internal Revenue Service can be unsettling, but a CP2100A notice is not a bill for unpaid taxes. It is an informational notice sent to payers who filed returns, such as Form 1099-NEC or 1099-MISC, with a payee name and Taxpayer Identification Number (TIN) that do not match IRS records. Discrepancies can arise from typographical errors, unreported name changes, or incorrect numbers from the payee. The notice prompts the payer to correct their records and obtain the correct information. While the notice itself does not assess a penalty, failing to respond can lead to future financial consequences.
Understanding the Notice Content
A CP2100A notice contains a detailed list of the information returns flagged for incorrect information. Each line item corresponds to a single return you filed and includes columns showing the payee’s name as you reported it and the incorrect TIN you submitted. The notice also specifies the type of form on which the error occurred, such as a Form 1099-INT for interest income or a Form 1099-DIV for dividends. Reviewing this list is the first step to comparing the information against your payment records and identifying which payees to contact.
Required Actions and Documentation
Upon identifying the payees with mismatched information, your required action is to solicit the correct TIN by sending a “First B Notice” to each payee listed. The purpose of the B Notice is to formally inform the payee that their name and TIN combination does not match IRS records and to request the correct details. This notice is a specific document outlined in IRS Publication 1281, Backup Withholding for Missing and Incorrect Name/TINs.
You must send this mailing within 15 business days of the date on your CP2100A notice. The B Notice package must include the notice itself and a blank Form W-9, Request for Taxpayer Identification Number and Certification. The payee is responsible for completing the Form W-9 with their correct name and TIN and signing it under penalties of perjury. Receiving this certified Form W-9 provides the documentation needed to update your records. The envelope should be marked with “Important Tax Information Enclosed” or a similar phrase.
Executing Backup Withholding
If you do not receive a certified Form W-9 back from a payee within 30 business days of sending the First B Notice, you are required to begin backup withholding. This involves deducting a flat rate of 24% from all future reportable payments made to that specific individual or business. This withholding must continue until the payee furnishes a properly certified Form W-9.
The funds withheld are not kept by your business and must be remitted to the IRS. These withheld amounts are reported and paid using Form 945, Annual Return of Withheld Federal Income Tax. This form is filed annually to report all nonpayroll federal income tax withheld, including backup withholding, and is separate from Form 941, which is used for payroll taxes.
Potential Penalties for Non-Compliance
Ignoring a CP2100A notice and failing to file correct information returns can lead to financial penalties. The IRS can impose a penalty for each information return filed with an incorrect TIN, based on how quickly you correct the error. If you file a corrected return within 30 days of the original due date, the penalty is $60 per return.
If the correction is made after 30 days but before August 1, the penalty increases to $130 per return. For corrections made after August 1, or not at all, the penalty rises to $330 per return. These penalties are subject to annual maximums, which differ for small and large businesses. For businesses with average annual gross receipts of $5 million or less, the maximum penalty is lower than for larger businesses.