Pub 5343

p5343--2019-08-00.pdf

Tribal Evaluation of Filing and Accuracy Compliance (TEFAC) - Compliance Check Report

Pub 5343

OMB: 1545-2026

Document [pdf]

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Tax Exempt and Government Entities

INDIAN TRIBAL GOVERNMENTS

Helpful Hints
for Indian Tribes
and Tribal Entities
to Avoid Penalties
on Federal Tax
Deposits and
Information Returns

Publication 5343 (8-2019) Catalog Number 72762X
Department of the Treasury Internal Revenue Service www.irs.gov

Table of Contents
Receiving a Notice from the IRS. .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SSA and IRS Reconciliation Processes.

The Basics of Federal Tax Deposits.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

How to Avoid an “Averaged” Failure-to-Deposit Penalty. .

. . . . . . . . . . . . . .

How to Respond to Notices and Avoid Information Return Penalties.

. . .

This guide is designed to assist tribal entities in understanding federal tax deposit laws
to avoid or minimize potential penalties. It is not all inclusive, and your local Indian Tribal
Governments (ITG) specialist is available to answer your questions.

Receive
Receiving a Notice From the IRS
Tribal governments or tribal entities occasionally receive notices from the Internal
Revenue Service (IRS) for reasons including failure to deposit payroll taxes timely and
late filing or non-filing of returns. If you receive a notice from the IRS, the two most
important things to do are:
n

Review your records to determine if the notice is correct, and

Respond to the notice by the due date.

Review

If you don’t respond timely, you can be subject to penalties and interest. If you don’t
review your records to ensure that the notice is correct, you may make unnecessary
payments. If you determine the notice is correct and you owe additional tax, penalties,
and interest, make the payment within the time frame shown in the notice.
ITG specialists and other IRS personnel are ready to assist you in understanding
the notices, determining their accuracy, and resolving issues. You can also contact
Customer Account Services toll-free at 877-829-5500. The call center is open
Monday through Friday, 8:00 a.m. to 5:00 p.m. local time.

Respond

Compare
SSA and IRS Reconciliation Processes
The Social Security Administration (SSA) maintains a record of total Social Security and Medicare
wages and tips paid by each employer to its employees and provides this information to the IRS.
The IRS compares these amounts to the amounts of wages and tips the employer reports to the IRS
on Forms 941, Employer’s Quarterly Federal Tax Return. If the reports are inconsistent, the IRS and
the SSA may contact employers for an explanation of the discrepancy and request additional wage
evidence.
n

The IRS contacts employers who reported more wages to the SSA than to the IRS.

The SSA contacts employers who reported more wages to the IRS than to the SSA.

If these discrepancies are not resolved, the IRS may assess penalties for filing incorrect reports.
When more wages are reported to the IRS than to the SSA, the SSA is concerned that employees’
earnings are not correctly reflected in SSA records. The SSA examines some of these cases and tries
to resolve the difference without contacting the employer.
If the SSA can’t resolve the difference, they will send the employer a notice and a questionnaire
requesting additional earnings data. If the employer doesn’t respond within 120 days, the SSA
sends a second notice. If the employer doesn’t respond to the second notice, the IRS will contact
the employer and possibly impose penalties.

Comparing Forms 941 to Form W-3

Contact

You should compare all your Form 941 reports to your Form W-3, Transmittal of Wage and Tax
Statements, for the year. If these amounts do not match, recheck records and identify necessary
adjustments. This will help you identify and resolve errors in your records to avoid filing erroneous
reports.
Identify any over or underreporting of income or wages and adjust any overpayment or underpayment of taxes on the Form 941 for the erroneous quarter. For example, a reporting error discovered
during a subsequent quarter would be corrected on Form 941-X, Adjusted Employer’s Quarterly
Federal Tax Return or Claim for Refund.
Use the following worksheet to assist you with this reconciliation.

Correct

Forms 941, W-2 and W-3 Reconciliation

Annual amounts from payroll records should match the total amounts reported on all Forms 941
for the year.

Total amounts reported on all Forms 941 for the year should match the sum of the same data
fields shown in the W-3 totals.

For more information, see “Reconciling Forms W-2, W-3, and 941 or 944” in section 12 of
Publication 15, (Circular E) Employer’s Tax Guide.

If these amounts do not match, recheck the records and identify necessary adjustments.

column a

column b

column c

column d

column e

column f

column g

Comparison
Area

941
Line #

Form 941
(all 4
quarters)

W-2, W-3
Box #

W-2s
(total of
all forms)

Amount
on W-3

Difference
(col c minus
column e)

Compensation

Line 2

Box 1

Federal income tax

Line 3

Box 2

Social Security wages

Line 5a
Column 1

Box 3

Social Security tips

Line 5b
Column 1

Box 7

Social Security tax

Line 5a + 5b
Column 2

Social Security tax
comparison
computation

Line 5a + 5b
(Column 2)
divided by 2

Box 4

Medicare wages

Line 5c
Column 1

Box 5

Medicare tax

Line 5c
Column 2

Medicare tax
comparison
computation

Line 5c
(Column 2)
divided by 2

Box 6

The Basics of Federal Tax Deposits
When you pay your employees, you do not pay them all the money they earned. As their employer,
you have the added responsibility of withholding taxes from their paychecks. The income tax and
employees’ share of Social Security and Medicare taxes that you withhold from your employees’
paychecks are part of their wages you pay to the U.S. Treasury instead of to your employees.
These are commonly called trust fund taxes.
Through this withholding, your employees pay their contributions toward Social Security and
Medicare benefits and the income taxes withheld reported on their tax returns. Your employees’
trust fund taxes, along with your matching share of Social Security and Medicare taxes, are paid
to the Treasury through the Electronic Federal Tax Payment System (EFTPS).
Congress has established large penalties for delays in turning over your employment taxes to the
Treasury. For more information, refer to Publication 15, (Circular E), Employer’s Tax Guide.

To illustrate the cost of making

FTD Penalty on $3,000 Deposit

your federal tax deposits late,

Penalty Amount

review the bar chart. This

$500

example shows how quickly a

$400

failure to deposit penalty on a
$3,000 deposit grows.

$450

$300
$300
$150

$200
$100

$60

1 to 5
6 to 15
16+

Days past due date

The failure to deposit (FTD)
penalty is computed by multi-

Taxes unpaid
10 days after bill

Failure to Deposit Penalty Percentage Rates

plying the amount of underpaid

Penalty
Cause for Penalty
Percentage Rate

deposit by a penalty percentage

Deposits made 1-5 days late

rate based on how many days

Deposits made 6-15 days late

Deposits made 16 + days late

10%

Taxes unpaid after the 10th day following the first IRS bill

15%

Amounts subject to electronic deposit requirements
but not deposited via EFTPS

10%

the deposit is late. The penalty
rates are shown in this table.

In addition to deposit penalties, you
will also be subject to penalties if
you file your Form 941 after the due
date, generally the last day of the
month that follows the end of the
quarter, or don’t pay the amount
shown as tax on the return.

Other Penalties

Rate Maximum

Late filed return

Late paid tax

5% per month
of unpaid tax

25%

½ % per month of
unpaid tax, then 1% after
Notice of Intent to Levy

25%

Review your payroll procedures to determine if you’re making timely deposits.

Who Must Make Deposits?
Deposits are required if you file Form 941 and report $2,500 or more in taxes per quarter.

What Taxes Must You Deposit?
n

Income tax withheld from your employees.

FICA (Social Security and Medicare) tax withheld from your employees – the employee’s share.

FICA (Social Security and Medicare) tax – the employer’s share.

Important Difference
n

Making deposits and filing employer returns with payments are not the same.

Taxes are reported by filing a return (such as a Form 941) and paid by depositing the money
with the Treasury.

When Should You Make Form 941 Tax Deposits?
n

If your total taxes for the quarter are less than $2,500, you can pay them with the return or
deposit them by the return due date.

If your total taxes on Form 941 are $2,500 or more, you’ll need to determine which deposit
schedule to follow (monthly or semiweekly).

To ensure that you don’t file and pay late, make a deposit the same day you make payroll or
no later than the deposit due date.

For further explanation of when to make a deposit, see Publication 15.

Deposit Schedule Exceptions
Business Days
n

If your deposit is due on a federal or state bank holiday, Saturday or Sunday, make it by the close
of the next business day.

$100,000 Next-Day Deposit Rule
n

If your tax liability is $100,000 or more on any day during a deposit period, you must deposit
the tax by the NEXT business day, whether you are a monthly or semiweekly schedule depositor.

Once you meet the $100,000 next-day rule, you must follow the semiweekly schedule for all
deposits less than $100,000. You are a semiweekly schedule depositor for the rest of the current
and next calendar year.

Since banks usually need 24 hours to make the deposit, you should request the deposit the
same day you accumulate the liability (before close of the business day).

Attach Schedule B to the Form 941 when filed.

For purposes of the $100,000 rule, do not continue accumulating a tax liability after the end of
a deposit period. For example, if a semiweekly schedule depositor has accumulated a liability of
$95,000 on a Tuesday (of a Saturday-through-Tuesday deposit period) and accumulated a $10,000
liability on Wednesday, the $100,000 next-day deposit rule does not apply. Thus, $95,000 must be
deposited by Friday and $10,000 must be deposited by the following Wednesday.
However, once you accumulate at least $100,000 in a deposit period, stop accumulating at the
end of that day and begin to accumulate anew on the next day.
Example: Fir Co. is a semiweekly schedule depositor. On Monday, Fir Co. accumulates taxes of
$110,000 and must deposit this amount on Tuesday, the next business day. On Tuesday, Fir Co.
accumulates additional taxes of $30,000. Because the $30,000 is not added to the previous $110,000
and is less than $100,000, Fir Co. must deposit the $30,000 by Friday (following the semiweekly
deposit schedule).
Example: Elm, Inc., started its business on April 1. On April 11, it paid wages for the first time and
accumulated a tax liability of $40,000. On Friday, April 18, Elm paid wages and accumulated a liability
of $60,000, bringing its accumulated tax liability to $100,000. Because this was the first year of its
business, the tax liability for its lookback period is considered to be zero, and it would be a monthly
schedule depositor based on the lookback rules. However, since Elm accumulated a $100,000 liability
on April 18, it became a semiweekly schedule depositor on April 19. It will be a semiweekly schedule
depositor for the remainder of the year and the next year. Elm must deposit the $100,000 by Monday,
April 21, the next business day. For an explanation of the lookback period see Publication 3151-A,
Resource Guide for Understanding Federal Tax Deposits, or Publication 15.

Avoid Failure to Deposit Penalties
Make deposits on or before the deposit due date.
n

Make your deposit any time on or after the date the liability is incurred and on or before the
deposit due date.

You are not required to wait until the due date nor will you receive a penalty for making deposits
prior to the due date.

For deposits made by EFTPS, you must initiate the transaction by 8 p.m. Eastern time
one business day before the date the deposit is due.

For accumulated tax liabilities of $100,000 or more on any day during a deposit period,
deposit the tax by the NEXT business day.

Include a summary of your tax liability with Form 941.
n

Monthly depositors use Part 2 of Form 941.

Semiweekly depositors use Schedule B, Employer’s Record of Federal Tax Liability.

Penalty
How to Avoid an “Averaged”
Failure-to-Deposit Penalty
IRS may assess an “averaged” failure-to-deposit (FTD) penalty of 2% to 10% if you are a monthly
schedule depositor and did not properly complete the monthly liability section (Part 2) of Form 941
when your total adjusted tax liability shown on Form 941 equaled or exceeded $2,500.
IRS may also assess an “averaged” FTD penalty of 2% to 10% if you are a semiweekly schedule
depositor and your total adjusted tax liability shown on Form 941 equaled or exceeded $2,500
and you:
n

Complete the monthly liability section (Part 2) of Form 941 instead of Schedule B on Form 941,

Fail to attach a properly completed Schedule B, or

Improperly complete Schedule B (for example, by entering tax deposits instead of tax liabilities in
the numbered spaces).

The “averaged” FTD penalty is computed by taking your total adjusted tax liability shown on Form
941 and distributing it equally throughout the tax period. As a result, your deposits and payments
may not be counted as timely because the actual dates of your tax liabilities cannot be accurately
determined.
You can avoid an “averaged” FTD penalty by reviewing your return prior to filing it. Follow these
steps before submitting your Form 941:
n

If you’re a monthly schedule depositor, report your tax liabilities (not your deposits) in the
monthly liability section (Part 2) of Form 941. Verify that your total liability for the quarter on Part 2
equals your taxes after adjustments and credits shown on the front of Form 941.

If you’re a semiweekly schedule depositor, report your tax liabilities (not your deposits) on
Schedule B (Form 941) in the lines that represent the dates you paid your employees. Verify that
your total liability on the bottom of Schedule B equals your taxes after adjustments and credits
shown on the front of Form 941.

Do not show negative amounts in the monthly liability section of Schedule B (Form 941).

For prior period errors, don’t adjust your tax liabilities reported on Form 941 or on Schedule B
with your current period return. Instead, file an adjusted return (Form 941-X or 944-X) if you’re
also adjusting your tax liability. If you’re only adjusting your deposits in response to an FTD
penalty notice, see the Instructions for Schedule B (Form 941).

Period
9

Percent

Schedule B (Form 941) Penalties
The IRS uses Schedule B (Form 941) to determine if you deposited your federal employment
tax liabilities on time. If you do not properly complete and file your Schedule B with Form 941, IRS
may propose an “averaged” failure-to-deposit penalty. See “Deposit Penalties” in section 11 of
Publication 15 for more information.

Who Must File Schedule B?
File Schedule B if you are a:
n

Semiweekly schedule depositor, or

Monthly schedule depositor who accumulated a tax liability of $100,000 or more on any given
day in the reporting period.

Completing the Schedule B Correctly
On Schedule B (Form 941), list your tax liability for each payroll date, including:
n

The federal income tax you withheld from your employees’ payroll, and

Both employee and employer share of Medicare and Social Security taxes.

The Most Common Errors and Reasons for Schedule B Penalties Are
n

Failure to include a Schedule B when required.

Reporting the date and amount of the deposits on Schedule B rather than the amount of the
tax liability on the date the liability was incurred.

The total tax after adjustments and credits on the front of Form 941 does not match the
total liability for the quarter reported on Schedule B.

The example on the following page shows the Schedule B (Form 941) for XYZ Tribe, a semiweekly
depositor, for the last quarter of 2018. The $100,000 deposit rule applies to XYZ Tribe for all deposits
for this quarter. Therefore, XYZ Tribe must make all deposits by the next business day.

Schedule B (Form 941):

960311

Report of Tax Liability for Semiweekly Schedule Depositors
(Rev. January 2017)
Employer identification number
(EIN)
Name (not your trade name)

OMB No. 1545-0029

Department of the Treasury — Internal Revenue Service

—

Report for this Quarter...

(Check one.)

1: January, February, March

XYZ Tribe
2

Calendar year

2: April, May, June

3: July, August, September

(Also check quarter)

✖ 4: October, November, December
Use this schedule to show your TAX LIABILITY for the quarter; don't use it to show your deposits. When you file this form with Form 941 or
Form 941-SS, don't change your tax liability by adjustments reported on any Forms 941-X or 944-X. You must fill out this form and attach it to
Form 941 or Form 941-SS if you're a semiweekly schedule depositor or became one because your accumulated tax liability on any day was
$100,000 or more. Write your daily tax liability on the numbered space that corresponds to the date wages were paid. See Section 11 in
Pub. 15 for details.

941 for 2018:

Form
Month
1
(Rev.
January
2018)

.
.
Name (not your trade.name)
3
4Trade name (if any) .
.
5
Address
.
6
.
7
.
8

Department of the Treasury — Internal Revenue Service

9
1
Employer identification number (EIN)
145,054
89 10
2

Number

City

12
13

15
16

.
.
.
.
.
.
.
134,987 .

Street

.
.
.
.
.
.
.
.

—

950117

Employer’s QUARTERLY Federal Tax Return
18
19
20
21
22
23

State

.
.
.
.
.
165,397 .
.

25
26
27
28
29

Tax liability for Month 1

Report for this Quarter of 2018
(Check one.)

445,440

1: January, February, March

2: April, May, June
3: July, August, September

Suite or30
room number

OMB No. 1545-0029

4: October, November, December

Go to www.irs.gov/Form941 for
instructions and the latest information.

ZIP code

Month 2

.
.
.
.
9
17
25
Read
the separate instructions
before you complete
941. Type or print
.
. Form
. within26 the boxes. .
2
10
18
Part 1: Answer these questions for this quarter.
165,987 . 98
.
.
.
3
11
19
27
Number of employees who received wages, tips, or other compensation for the pay period
1
. 12 (Quarter
. 3), or28 Dec. 12 (Quarter.4) 1
4
12
202), Sept. 12 (Quarter
including: Mar.
1), June 12.(Quarter
176,654 . 43 21
.
.
. 2
5
13
29
2
Wages, tips, and other compensation . . . . . . . . . . . . . . . . .
.
.
.
.
6
14
22
30
3
Federal income
tax withheld from wages,
tips, and other compensation
. . . . .. .
3
.
.
.
7
15
23
31
. are
. security or Medicare tax
84
16 other compensation
24 subject to social
If no wages,. tips, and
Foreign country name

Month 3
15a
25b
35c
45d
5

75f
8

6
7

Foreign postal code

Foreign province/county

Column 1

.
17
. .× 0.12425=
. .
187,678
87
.
.
10
18
. .× 0.12426=
Taxable social security tips . . .
.
.
11
19
. .× 0.02927=
Taxable Medicare wages
& tips . .
Taxable wages
. & tips
.
12 subject to
20
. .× 0.00928=
Additional Medicare Tax withholding
.
.
.
13
21
29
Add Column
. 2 from14lines 5a, 5b, 5c, and
. 5d 22 . . . . . .. . . 30. . . . .
. Notice
. due
15 and Demand—Tax
23 on unreported .
Section 3121(q)
tips (see31instructions)
166,987 . 90
.
.
16
24
Total taxes before adjustments. Add lines 3, 5e, and 5f . . . . . . . . . .

5e
5f
6

IRS.gov/form941

Current quarter’s adjustments for tips and group-term life insurance

Cat. No. 11967Q

Total taxes after adjustments. Combine lines 6 through 9

Qualified small business payroll tax credit for increasing research activities. Attach Form 8974

Total taxes after adjustments and credits. Subtract line 11 from line 10 .

Total deposits for this quarter, including overpayment applied from a prior quarter and
overpayments applied from Form 941-X, 941-X (PR), 944-X, or 944-X (SP) filed in the current quarter

Balance due. If line 12 is more than line 13, enter the difference and see instructions

▶

.
.
Check and go to line 6.

354,666

Current quarter’s adjustment for sick pay .

Tax liability for Month 3

Total must equal line 12 on Form 941 or Form 941-SS.

Overpayment. If line 13 is more than line 12, enter the difference

44,000

42 Check one:

.
.
.
Total liability for the quarter
1,142,749 .. 28
Schedule B (Form 941) (Rev. 1-2017)
.
.
1,142,749 . 28
.
1,142,749 . 28
1,186,749

✖ Apply to next return.

.
.

Send a refund.

Next ■▶

You MUST complete both pages of Form 941 and SIGN it.

For Privacy Act and Paperwork Reduction Act Notice, see the back of the Payment Voucher.

..
..
..
..
.
.. .
.. .

Fill in your total liability for the quarter (Month 1 + Month 2 + Month 3) ▶

For Paperwork Reduction Act Notice, see separate instructions.

342,642

Column 2

9
Taxable social security
wages .

Current quarter’s adjustment for fractions of cents .

Tax liability for Month 2

Cat. No. 17001Z

Form 941 (Rev. 1-2018)

Total
must equal
line 12
of 941!

Notices
How to Respond to Notices and
Avoid Information Return Penalties
The IRS will send a Notice 972CG, Notice of Proposed Civil Penalty, if you file a Form 1099 or W-2G
with a missing or incorrect name and taxpayer identification number (TIN) combination. A name and
TIN combination is incorrect when it doesn’t match or can’t be found on the IRS Social Security and
employer identification numbers files. Notice 972G proposes a penalty of $270 (adjusted annually for
inflation) for each return you did not file correctly. Compare the list with your records to determine:
n

If you took appropriate action to meet the requirements for reasonable cause, and

If you must make an annual solicitation in the current year to avoid penalties in
future years.

For more information on Notice 972CG and annual solicitations, see Publication 1586, Reasonable
Cause Regulations & Requirements for Missing and Incorrect Name/TINs. Refer to Treasury Regulation
Section 301.6724-1 for reasonable cause guidelines.
One way to get the necessary information and avoid penalties is to use a Form W-9, Request for
Taxpayer Identification Number and Certification, or an acceptable substitute, to get the payee’s
correct name and TIN. If a payee’s TIN is not on record at the time a reportable payment is made,
backup withholding is generally required.
The payee may use the Form W-9 to certify that the payee’s TIN is correct and that the payee is a
U.S. person. The payee may also provide information about the type of business entity it is, which will
help you determine if you are required to file an information return. The payee signs the form under

Name

penalty of perjury. Payees may be liable for penalties for failure to furnish the TIN or for providing
false information.
A payee who is an individual should generally include a Social Security number (SSN) on the Form
W-9. An individual payee must furnish the name shown on his or her personal income tax return,
even though the individual may also provide a business name.
A payee who is not an individual (such as a corporation) should enter its business name as shown on
federal tax documents on line 1 on the Form W-9. If the payee entity has a “doing business as” (dba)
name, it may be listed on the second line. The entity should include its EIN in part 1 of Form W-9.
A name/TIN combination is unique. It is considered incorrect when it doesn’t match or can’t be found
on IRS files that contain names and TINs. Partnerships and corporations must use an EIN. A limited
liability company (LLC) may be treated for tax purposes as a disregarded entity, a partnership or a
corporation. A single-member LLC that is disregarded as an entity separate from its owner, must

Number

provide the SSN (or EIN, if the owner has one). Do not enter the EIN of the disregarded entity.
Refer to Form W-9 and its instructions for additional information on the proper name and number
combinations to complete the form.
U.S. resident aliens who are not eligible to receive an SSN must apply for an individual tax identification number (ITIN) on Form W-7, Application for IRS Individual Taxpayer Identification Number.
Individuals who have an ITIN may also use Form W-9.
The IRS will issue a CP2100 or CP2100A Notice if the payee’s name and TIN on the information
return filed does not match IRS records.
This notice is informing you as the payer, that you may be responsible for beginning backup withholding, if you haven’t already done so. Backup withholding should begin immediately if the payee
refuses or fails to provide a TIN, or if the TIN provided is obviously incorrect (not 9 digits or contains
something other than a number). The CP2100/2100A Notice is accompanied by a listing of missing,
incorrect or not currently issued payee TINs. Publication 1281, Backup Withholding on Missing and
Incorrect Name/TIN(s), provides additional information on backup withholding.

Backup Withholding Will Apply If
1) The payee fails to furnish their SSN or TIN, or
2) The IRS notifies you to impose backup withholding because the payee furnished an incorrect TIN.

Tips for Getting “Good” TINs
n

Always secure a contractor’s TIN before paying for services.

Avoid abbreviating company names.

If possible, use the same name as it appeared on the original application for an EIN (Form SS-4) or
Social Security card.

If you know a company has changed its name, ask if they informed the IRS. The IRS and SSA must
be informed of any name changes.

When filing Form 1099-MISC for a sole proprietor, always put the individual’s name first, followed
by the business name. For example, Joe’s Garage should be reported as Joseph Johnson, DBA
Joe’s Garage.

The best tool to help you gather information on contractors and vendors, including the payee’s
names, TINs and exempt status, is Form W-9.

You can find more information on backup withholding in Publication 1281, Backup Withholding for
Missing and Incorrect Name/TIN(s). For additional information on how to fill out a Form W-9, see the
Form W-9 instructions. Keep the Forms W-9 in your files in the event the IRS requests verification of
the name/TIN listed on a Form 1099.

If you have questions about withholding, information reporting, Forms 1099, or the CP2100 or
CP2100A Notices and listings, you may call your local ITG specialist or Martinsburg Computing
Center Information Reporting Program Customer Service section at 866-455-7438 (toll-free). The
telecommunication device for the deaf number is 304-267-3367 (not a toll-free number). The phones
are open 8:30 a.m. to 4:30 p.m. Monday through Friday, Eastern time. In addition, you may email
your question to [email protected].

What Should You Do if You Receive a CP2100 or CP2100A
(Backup Withholding) Notice?
Compare the listing with your records.
For missing TINs: If you haven’t started backup withholding, begin to do so immediately and
continue until you receive a TIN. You must make up to three solicitations for the TIN (initial, first
annual, second annual) to avoid a penalty for failing to include a TIN on the information return.
For incorrect TINs: Compare the accounts on the listing with your business records. See
Publication 1281 for the solicitation requirements to avoid a penalty for failure to include the correct
TIN on an information return. If they agree, send the appropriate “B” Notice to the payee. If an
account doesn’t agree, it could be the result of a recent update to SSA records, an error in the
information you submitted, or an IRS processing error. If this type of error occurred, the only thing
you should do is correct or update your records, if necessary.
A “B” Notice is a backup withholding notice. There are two “B” Notices – the First “B” Notice and
the Second “B” Notice. You 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 for soliciting a correct
name/TIN combination. You must send the Second “B” Notice to a payee after you receive a second
CP2100 or CP2100A Notice within a three-calendar year period. The text of the Second “B” Notice
tells the payee to contact the IRS or SSA to obtain the correct name/TIN combination. The mailing
of the second notice should not include a Form W-9. See Publication 1281 for additional information
on the First and Second “B” Notices.
The table on the following page is a quick reference should you receive a CP2100 or CP2100A
Notice on backup withholding.

What’s the
problem?

Compare the IRS listing
to your records and...

Then...

Missing TINs

Begin or continue backup

Solicit TIN from Payee:

withholding immediately.

1. Initially (when payment was made).
2. First annual solicitation by December 31 of
the year payment is made.
3. Second annual solicitation by December 31

Incorrect TINs

▼

of the following year.

If they agree (the TIN/name combination

Send the First or Second “B” Notice to the Payee:

on the list match the W-9, W-2G, or

1. You have 15 business days to send a “B” Notice

File Type	application/pdf
File Title	Publication 5343 (8-2019)
Subject	Helpful Hints for Indian Tribes and Tribal Entitites to Avoid Penalties on Federal Tax Deposits and Information Returns
Author	SE:T:GESS:ITG
File Modified	2019-09-17
File Created	2019-09-16