C Notice IRS – Help with IRS C Notice – Former IRS – Fresh Start Tax LLC
The IRS C-Notice.
A IRS C-Notice is sent from the IRS instructing a financial or banking institution to backup withhold on reportable payments, specifically interest, dividends, short-term capital gains, long term capital gains, and redemption’s due to a payee’s under reporting of income. IRS is stating to keep a tight reign of these issues due to many taxpayers owing back taxes.
An IRS C-Notice is placed on an account if individuals consistently under-reports or fails to report interest, dividend income or other income.
The IRS must notify the institution to stop withholding once the discrepancy is resolved.
Per the IRS Code
IRS IRM 5.19.3.1
Overview – Backup Withholding Program “B” and ” C” Programs
There are two separate Backup Withholding (BWH) programs that require payers to withhold at the backup withholding rate from recipients’ (payees’) payment of Form 1099 income.
5.19.3.2
What Are the “B” and “C” BWH Programs?
The “B” BWH program, (Regulation 31.3406 (d)-5(d)), provides notices to payers (a financial institution, business or person) who file information returns (see Forms 1099 below) with incorrect or missing Taxpayer Identification Numbers (TINs).
The notices, CP2100 and CP2100A, advise payers that backup withholding could become necessary if payees (recipients of Forms 1099) fail to certify their TIN.
The CP2100 and CP2100A Notices also list accounts with missing TIN’s on which payers should have been backup withholding under section 3406(a)(1)(A).
Payers with missing TIN accounts should not wait to receive a CP2100 or CP2100A to begin backup withholding. The “B” program includes Forms 1099-B, DIV, INT, MISC, OID, PATR information returns.
The “C” BWH program (Regulation 31.3406 (c)–1) provides notices to payees (recipient of Forms 1099 below) who have under reported their interest or dividend income or failed to file a tax return reporting such income when required.
These notices inform the payee what must be done to prevent BWH. The “C” program includes Forms 1099-DIV, INT, OID, and PATR information returns.
Under reporter-related BWH requires payers to withhold at the backup withholding rate on Form 1099 payments to payees if the payee fails to correctly report these payments on an income tax return. If a payee fails to file a return (non filer) it is considered unreported income and may also be subject to the under reporter related BWH.
C Notice IRS – Help with IRS C Notice – Former IRS – Fresh Start Tax LLC
