Understand the Best Techniques to Handle a B Notice

April 16, 2012 — 1,256 views  
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The Internal Revenue Service (IRS) will issue a B Notice when a person is responsible for backup holding taxes. You may face questions if a client receives the form, but you can handle any concerns by understanding the document's purpose.

The IRS will issue the notice if the agency identifies incorrect or missing taxpayer identification numbers on Form 1099 information returns. This problem may seem serious, but you can follow these simple techniques to verify your client's tax ID number before you submit any of the tax paperwork.

A person could receive one of two possible B Notices. The first includes a Form W-9 and tells a payee to contact the IRS or Social Security Administration (SSA) to obtain the correct name or tax ID number. Additionally, large volume fliers may receive the second B Notice, which does not involve Form W-9. A filer will receive a CP2100 if there is inaccurate tax ID information on 250 or more documents, and the IRS will issue a CP2100A to those with less than 250 mistakes.

You can correct these mistakes on IRS documents, but there are exceptions you can tell your clients about as well. These exclusions include real estate transactions, foreclosures, cancelled debts, long-term care benefits and state or local income tax refunds.

Give your clients as many options as possible to help them avoid B Notice tax fines and penalties.