The IRS CP2100, often referred to as a B-notice is a critical document that every business filing information returns should be familiar with. When you receive a CP2100 notice, the IRS is alerting you to a discrepancy between the Taxpayer Identification Numbers (TINs) and names that you’ve reported on your information returns—such as1099 forms—and the information in the IRS database. Understanding what this notice means and how to respond appropriately is essential for maintaining compliance and avoiding penalties.
Why Did You Receive a CP2100 or CP2100A Notice?
The IRS issues CP2100 notices when they detect mismatches between the payee TINs and names you’ve submitted on 1099 forms. These discrepancies typically occur due to:
- Incorrect TINs provided by payees
- Transcription errors when entering TIN information
- Name changes not reported to the Social Security Administration
- Transposed numbers in the TIN
- Using a nickname instead of a legal name
What Are the Consequences of Ignoring a CP2100 Notice?
Failing to address a CP2100 notice can lead to significant consequences:
- Backup Withholding Requirements: You may be required to begin backup withholding at the current rate of 24% on payments made to the affected payees.
- Penalties: The IRS can impose penalties for incorrect TIN reporting, which can range from $60 to $660 per incorrect return, depending on when (or if) corrections are made.
- Additional Notices: Continued non-compliance will result in follow-up notices (971CG or P-Notices) and potential escalation of penalties.
- Audit Risk: Uncorrected TIN mismatches can increase your risk of broader IRS scrutiny.
How to Respond to a CP2100 Notice
When you receive a CP2100 notice, follow these steps to maintain compliance:
Review the list of mismatches
- Carefully examine the list of incorrect payee TIN/name combinations
- Compare this information against your internal records
- Identify where errors may have occurred in your data entry or collection process
Start backup withholding
- If you receive a B-Notice, you should start backup withholding in accordance to IRS guidelines
- Notify recipients of backup withholding.
- Start backup withholding – the IRS backup withholding rate is 24% and should be applied to all future payments for listed recipients.
Request W-9 and update vendor records
- Request a new W-9 form from recipients listed on the CP2100
- Promptly update your vendor master file with any corrected information
- Always maintain documentation of all B-Notices sent – this can help abate penalties in the future.
- Implement a verification system like TINCheck for reviewing returned W-9 forms
- Document your correction efforts for future reference
Perform TIN verification before future filings
- Implement procedures to verify TINs before filing information returns
- Utilize TINCheck Real-Time or Bulk TIN to validate information before submission
- Implement TINChecks’ API into your onboarding workstream
How to Prevent Future CP2100 Notices
Preventing CP2100 notices is always better than responding to them. Here are proactive strategies:
Implement Bulk TIN Matching
Bulk TIN Matching allows you to verify name/TIN combinations before filing information returns. TINCheck recommends businesses Bulk TIN match twice a year, once in the spring, once in the fall. Doing so will catch any errors ahead of 1099 filing season and limit the amount of CP2100 Notices you receive for information returns like Forms 1099-B, 1099-DIV, 1099-INT, 1099-K, 1099-MISC, 1099-NEC, and 1099-PATR.
Collect W-9 Forms Upfront
Request a completed W-9 form from all vendors before making payments. Ensure the information is legible and complete, with the appropriate entity type selected.
Establish Validation Procedures
- Create a standardized process for validating vendor information during onboarding. This might include:
- Double-entry verification for TINs
- Comparing legal name against payment name
- Validating address information
Use Automation for Compliance to:
- Automatically verify TIN/name combinations
- Flag potential issues before filing
- Maintain audit trails of verification efforts
- Help the B-Notices process
CP2100 Frequently Asked Questions
What’s the difference between CP2100 and CP2100A?
CP2100 notices are typically sent to businesses that file information returns electronically or magnetically. CP2100A notices are generally sent to businesses that file paper returns or have fewer than 250 mismatched returns. The content and required response are essentially the same.
What is a B-Notice?
A B notice (Backup Withholding Notice) is a document you’re required to send to payees listed on the CP2100/CP2100A notice. It informs them that their TIN/name combination doesn’t match IRS records and requests corrected information. First B notices require the recipient to provide a new Form W-9, while second B notices require official TIN validation from the SSA or IRS.
Do I have to backup withhold after a CP2100 notice?
You must begin backup withholding if a payee fails to respond to your B notice within 30 days (for a first B notice) or 30 days for a second B notice. Backup withholding is currently 24% of reportable payments.
How long do I have to respond?
You have 15 business days from the date of the CP2100/CP2100A notice to send B-Notices to the affected payees. The clock starts ticking from the date on the notice, not from when you receive it.
Avoid CP2100 notices altogether next year—get started with TINCheck today.