CP2100 Season is Here!

It’s that time of year when CP2100 letters will begin arriving. This article will cover what a recipient of such a letter should do.

What is It?

To understand CP2100 letters, we need to start at the start. Your organization files a 1099 with the IRS. This 1099 shows your recipient’s name and their taxpayer identification number (TIN).

If this name and TIN combination on your form doesn’t match in the IRS’s computers, the IRS sends you a CP2100 letter to tell you about the mismatch.

Your job is to review the list of mismatches. It might only be one mismatch, or it might be many mismatches. In either case, you review the list.

Some of the mismatches might not require any action on your part, or might only require you to do something internally. One example of this is if you can see immediately that the error was yours, such as a transposed number on a TIN or a typo in a name. In this situation, you do not send a corrected 1099 to the IRS. You simply correct your records internally so you don’t make the error again.

Unless it’s an error such as that, which can be easily explained, you’ll need to send a letter to your payee, telling them that the IRS has notified you of an error with their name and TIN. This letter is called a “B” Notice. (Note: the IRS puts B in quotation marks, as in “B.”)

Basis Date

Before we move on to sending "B" Notices, we need to determine your basis date. Your basis date is the LATER of:

• The date printed on the CP2100 Letter, or

• The date you receive the CP2100 letter.

You must send the "B" Notice within 15 business days of your basis date. The recipient of the "B" Notice must respond within 30 business days of your basis date.

First vs. Second Notices

Just like ice cream, “B” Notices come in two flavors — First “B” Notices and Second “B” Notices. Yum!

The best way to explain whether you send a first or second notice is to explain what a second notice means. Second notice means it’s the second time in a three-year period that you’ve been notified of a problem with someone’s name/TIN combination on a CP2100 letter. If that’s not the case, then you send a First “B” Notice.

First “B” Notices

First “B” Notices involve sending the proper “B” Notice language found in Publication 1281, along with a W-9. This “B” Notice tells the payee that you were notified by the IRS of a potential error with the payee’s name and TIN, and you’re asking the payee to fill out a new W-9 and send it back to you.

Second “B” Notices

With a Second “B” Notice, you do not send a W-9. Instead, the payee must send you a copy of their Social Security card (if it’s a Social Security number issue), or a Letter 147C from the IRS, proving an EIN.

See our prior article about Letter 147C and the new ability for businesses to download an EIN verification off the internet, which the IRS says can be used in place of a 147C at banks. The IRS has not specifically said, but your author believes you CANNOT use this downloaded notification. All published guidance says Letter 147C, and in places the guidance literally says that you can only accept the 147C and nothing else.

After the “B” Notice

If your payee replies to you, it’s straightforward: you simply update your records and file future 1099s with the new information. You do not file corrected 1099s, and you don’t need to send anything to the IRS.

If the payee does not reply to you, and you pay them again, you must backup withhold on future payments to your payee.

Conclusion

This is, of course, a high-level view of CP2100 letters. Reach out to the author about in-depth training or consulting on CP2100 letters and “B” Notices.