B notice season: How to prevent common hassles with TINs

Since IRS has sent out its second batch of CP2100/CP2100A notices, backup withholding and B notices may be on your mind right now.

While IRS notified many A/P pros of any taxpayer identification number (TIN) issues back in the fall, the agency recently notified those who submitted corrected returns of any TIN errors it discovered.

And this can be a big hassle for A/P. You’ll have to send out B notices to your contractors and vendors, and coordinate backup withholding if you don’t get a response.

Here’s how you can stay on top of things if you did receive a notice from IRS this spring – and what you can do to prevent any issues in the future with B notices.

Check Service’s work

If it’s the first notice you’ve received about a vendor, IRS says you’ll need to send them a B notice with a Form W-9 attached.

However, be sure to do your due diligence first. The Service has been swamped lately due to pandemic staffing issues, so it’s not uncommon to receive notices in error because of a processing issue.

Double-check that the TIN you have on file for the vendor or contractor is correct. IRS offers a TIN matching service online at irs.gov/e-services.

If the TIN comes back as a match, reach out to IRS and notify the agency the number was verified and correct.

However, if there’s a discrepancy, it’s time to notify the vendor that they’ll need to submit another W-9.

Second B notice procedure

Remember that the process for sending B notices is different if you’ve received your second notice from IRS about the same vendor in three calendar years.

You don’t have to send them a Form W-9. But, per Publication 1281, you do have to send a slightly different second B notice with text telling them to contact IRS and SSA about the TIN issue.

Also, IRS won’t let you know whether you’re receiving another notice in this time frame. You’ll have to keep track of that yourself.

Keeping track is critical since you don’t have to send a second B notice in certain circumstances (e.g., you receive two IRS notices about the same vendor in the same calendar year).

Prevent mailing messes

You don’t want to miss sending out a B notice to a vendor because you didn’t receive any notification from IRS at all. This could lead to more headaches that’ll require you to do backup withholding while the problem’s settled.

To prevent this, be proactive, especially if you have multiple locations. IRS may mail notices about a vendor to another one of your offices or to the main headquarters instead of your location.

Check in periodically with each location to be sure you aren’t missing any mailings from IRS. And while you’re at it, make sure your home mailroom is on the lookout, too.

And to ensure vendors and contractors open your B notices, be sure to clearly mark the mailing envelope with “Important tax information enclosed” or “Important tax return document enclosed,” per IRS guidelines.

Stop problems before they start

The best way to avoid issues with vendors and TIN mismatches is prevention. When you start working with new vendors and contractors, ask for a completed Form W-9 up front before issuing any payments.

Then, each quarter, along with any other A/P or Finance audits you’re doing, perform an audit of all your vendor and contractor TINs. This’ll help you confirm whether they’re correct. And it’ll help you spot any mergers or name changes that impact a vendor’s TIN so you can reach out to update the info you have on file.