Sovos recently held a webinar on best practices for dealing with B and P notices in 1099 reporting. Here, Sovos regulatory experts answer questions from webinar viewers.
Do we have to send a B-notice to someone we will never work with again?
B-notices are sent in reaction to a CP2100/CP2100A from the IRS for reporting that has already occurred, so the payer is still responsible for the reporting as it has been done thus far. Consequently, even if a certain payee will never work for you again, you are still responsible for said reporting and must send a B-notice and follow through with the solicitation process.
Do we get notices for filing corrected 1099-Rs?
1099-Rs do not fall under the umbrella of B-notices, aka CP2100/CP2100A, so you will not receive B-notices for 1099-Rs.
You can, however, receive a P-Notice (972CG) for the 1099-R, and you are required to engage in a solicitation process similar to that of other P-notices: initial/first/second solicitations, with withholding being distinctly different:
- Withholding on taxable portion of the payment, rate depends on type of payment made.
- Eligible rollover distribution that is not paid directly to an eligible retirement plan, 20%.
- Non-periodic, non-eligible rollover distribution, 10%.
If I am not receiving B or P notices, how do I know where they are being delivered?
These notices are delivered to the address of record that the IRS has on file. To make sure you are receiving these notices, make sure your information with the IRS is current and correct.
Is it possible to receive a B notice but not a P notice?
Yes, a P-notice does not necessarily follow a B-notice. If you are able to cure the issue that caused the B-notice to issue in the first place, either by obtaining a correct TIN through the solicitation process or correcting the name/TIN combination using a W-9 and/or Letter 147C, then a P-notice will not issue.
It is also worth noting a P-notice CAN issue without a B-notice preceding it. This is because P-notices encompass a broader set of errors than those covered by the B-notice process, including late filing or errors in filing procedure.
I received a CD B notice. What do I do with this?
If you received a CD that contains your B-notice, you are likely a large-volume filer where more than 250 1099s have errors. Receiving a CD is the equivalent of receiving an “electronic” copy of the B-notice, which the IRS is required to send to you if you are a large-volume filer.
Use the information on the CD to engage in the regular B-notice process, including sending solicitations.
What should we do if the provider sends back a B-notice with the exact same information that we already have for that provider? Would we just start backup withholding, or should we inform the provider that its information is still wrong?
Upon receiving a W-9 that lists the exact same information that was previously identified as incorrect by the IRS, maintain that W-9 as a record of the payee certifying the name/TIN combination. Do not begin backup withholding for this reason alone.
For SSN validation, what can we accept? Should we only accept an SSN card, or can we accept a W-2, letter from the IRS, paystub, etc.?
For the first B-notice, the only validation required from the payee is a W-9 indicating a payee-certified name/TIN validation. The First B-notice should outline the steps payees should take to validate their own SSN.
For the second B-notice, the only two options permitted in the instructions are a copy of a Social Security card (for individuals) or a Letter 147C (for non-individuals and sole proprietors). The Social Security card must show a correct name/TIN combination that either differs from the combination appearing on the notice, or must show a date of issuance no earlier than six months prior to the date on the second B-notice sent.
Consequently, payers should not accept alternative forms of SSN validation in either the first or second B-notice phases, and should only accept a W-9 (first B-Notice), or a copy of the payee SSN card or Letter 147c (second B-Notice).
In regard to the Form W-9, which version(s) can we accept? Should we only be accepting the latest revision of December 2014 from our customers, or can we accept older revision dates?
Generally, the most recent revision of Form W-9 should be used when soliciting information from payees. With that being said, the IRS permits the use of a substitute Form W-9 when soliciting payee information. The standards are that the substitute form must be substantially similar to the official form AND that it satisfies certain certification requirements. To review the rules relating to Substitute Form W-9s, review the instructions for Form W-9 by clicking here.
What is the turnaround time for the IRS to respond to a 147C request?
There is no official turnaround time for the IRS to respond to a Letter 147C request, and processing times may vary.
Have questions? Contact Sovos.