When a payer files Forms 1099 with a missing or wrong name and taxpayer identification number (TIN), the IRS sends a CP2100 or CP2100A notice, and the payer takes on a clock. The backup withholding rate is 24 percent. A first "B" notice goes to the payee within 15 business days, and withholding starts no later than 30 business days after the CP2100 or CP2100A date if the payee has not returned a signed Form W-9. A second notice for the same payee within three calendar years requires IRS or Social Security validation, not just a new W-9. This article sets out the sequence from Publication 1281 and the statute, with a dated example. The thresholds and general mechanics are in the Form 1099 reporting and backup withholding standard.
What triggers backup withholding under section 3406?
Section 3406(a)(1) lists four conditions: the payee fails to furnish a TIN in the manner required, the IRS notifies the payer that the TIN furnished is incorrect, there has been a notified payee underreporting, or there has been a payee certification failure. Under section 3406(a)(2), the last two apply only to interest and dividend payments.
For underreporting, section 3406(c)(1) lets the IRS notify payers once at least 4 notices have been mailed to the payee over a period of at least 120 days. The IRS calls the missing or incorrect TIN program "BWH-B" and the underreporting program "BWH-C."
The rate is 24 percent for all subject payments after December 31, 2017, according to Publication 1281. The statute expresses it as the product of the fourth lowest rate under section 1(c) and the payment. The payments covered include most reportable on Forms 1099 and W-2G: nonemployee pay, interest, dividends, rents, royalties, payment card and third-party network transactions, broker payments and gambling winnings.
What is the difference between a CP2100 and a CP2100A?
A CP2100 or CP2100A notice tells a payer it may be responsible for backup withholding and comes with a listing of missing, incorrect or not currently issued payee TINs. The form depends on the number of error documents: 250 or more is a large filer and gets a data file, 50 to 249 is a mid-size filer and gets a paper CP2100, and fewer than 50 is a small filer and gets a paper CP2100A.
The notice does not say whether it is the first or second for a payee. The IRS states that the backup withholding regulations make the payer responsible for tracking that status. A vendor master file that stores the notice date and the B notice date for each payee is the practical answer.
What happens for a missing TIN versus an incorrect TIN?
For a missing TIN, begin backup withholding on any reportable payment and continue until a TIN is received. Do not send a first or second B notice. To avoid the penalty for filing a return without a TIN, make up to three solicitations: the initial one when the account is opened or the transaction occurs, a first annual solicitation by December 31 of the year the account is opened (January 31 of the next year for accounts opened in the prior December), and a second annual solicitation by December 31 of the following year.
For an incorrect name and TIN combination, compare the listing with your records and match on name, TIN and account number. The B notice goes out only to a payee whose combination agrees with the one the IRS identified. If the information changed after filing, or the IRS misprinted it, no B notice is sent.
What are the first and second B notice deadlines?
First B notice. Send the notice, a Form W-9 and an optional reply envelope within 15 business days from the date of the CP2100 or CP2100A, or the date received, whichever is later. Date the notice no later than 30 business days after that same date. The outer envelope must be marked "IMPORTANT TAX INFORMATION ENCLOSED" or "IMPORTANT TAX RETURN DOCUMENT ENCLOSED." Begin backup withholding on payees who do not return a signed W-9 no later than 30 business days after that same CP2100 or CP2100A date. The payer may begin the day after receiving the CP2100. Stop within 30 calendar days of receiving the signed W-9.
Second B notice. It applies when the same payee TIN appears a second time within three calendar years. The deadlines to send are the same, but do not include a W-9. An individual payee must provide a copy of a Social Security card; an EIN must be validated by the IRS on Letter 147C. The payer allows 30 business days after the date of the second notice to receive the validation, and must begin backup withholding on the 30th business day if it has not. It may start earlier. Withholding continues until validation arrives and stops no later than 30 days after.
Third and later notices. Generally you do not have to send a B notice more than two times within three calendar years to the same account. If a second CP2100 arrives in the same calendar year as the first, it may be disregarded.
An undeliverable B notice means backup withholding must begin. The payer keeps the returned notice for three years to track the two-in-three-year rule.
What does a dated example look like?
A payer receives a CP2100 dated Monday, March 2, 2026, and a vendor is listed for the first time.
- 15 business days: the B notice and W-9 go to the vendor by Monday, March 23, 2026.
- 30 business days: backup withholding begins no later than Monday, April 13, 2026, if no signed W-9 is back.
- Payment of $10,000 on April 20 with no W-9: withhold 24 percent, $2,400, and pay the vendor $7,600.
- Signed W-9 received May 6: stop withholding no later than 30 calendar days later, June 5, 2026.
The amount withheld is reported on Form 945, Annual Return of Withheld Federal Income Tax, and deposited under the Form 945 rules. The payee claims the withheld amount on the return for the year the income was received.
If the same vendor appears on a CP2100 in 2027, that is the second notification within three calendar years, and the second B notice with no W-9 applies.
How does TIN matching reduce the notices?
TIN Matching is an IRS e-services product that lets payers filing Forms 1099-B, DIV, INT, K, MISC, OID and PATR check name and TIN combinations before submitting returns. The IRS says payers who validate before filing can expect fewer CP2100 and penalty notices. The IRS B program page also lists 1099-NEC among the forms whose payers may be eligible. Use it before the January filing run, not after.
What controls should the file show?
Test the accounts payable process, not only the notice response:
- Every new vendor has a signed W-9 before the first payment, matched to the 1099 vendor master. The vendor onboarding testing in the 1099 standard lists what to inspect.
- A log of CP2100 receipts, B notice dates, and withholding start and stop dates.
- A reconciliation of backup withholding accrued, deposited, reported on Form 945 and shown on the Forms 1099.
- Annual solicitation evidence for payees with missing TINs.
Related deadlines and penalty rules are in W-2 and 1099 filing and Form 1099 thresholds in 2026.
CORAA prepares ready-to-review audit files for US CPA firms; see /us.
Sources
- IRS, Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s): https://www.irs.gov/pub/irs-pdf/p1281.pdf
- Cornell Law School Legal Information Institute, 26 U.S.C. 3406: https://www.law.cornell.edu/uscode/text/26/3406
- IRS, Backup withholding: https://www.irs.gov/businesses/small-businesses-self-employed/backup-withholding
- IRS, Backup withholding "B" program: https://www.irs.gov/businesses/small-businesses-self-employed/backup-withholding-b-program
- IRS, Topic no. 307, Backup withholding: https://www.irs.gov/taxtopics/tc307
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