The CP2100A is the second B-notice in the backup withholding process. If you received a CP2100 (first B-notice) and the same payees still have incorrect TINs, the CP2100A escalates the requirements. You must now begin backup withholding at 24% on all payments to the listed payees, effective immediately.
What's Different From the First B-Notice
With the first B-notice (CP2100), you were required to contact the payee and request a corrected W-9. With the CP2100A, the grace period is over. You must begin backup withholding regardless of whether the payee responds. The payee cannot cure the second B-notice by simply providing a new W-9 to you. They must verify their TIN directly with the Social Security Administration or IRS.
Your Obligations
Begin withholding 24% from all reportable payments to the identified payees immediately. Deposit the withheld amounts with the IRS using Form 945 (Annual Return of Withheld Federal Income Tax). Report the backup withholding on the payee's 1099 at year end. Continue withholding until the payee provides a letter from SSA or IRS confirming their TIN is correct.
Liability for Non-Compliance
If you don't begin backup withholding as required, you become liable for the amount you should have withheld. The IRS can assess the 24% against your business for every payment made to the non-compliant payee after the CP2100A was issued. On a contractor you pay $50,000, that's $12,000 in potential liability.
Practical Steps
Update your accounting system to flag the affected payees for backup withholding. Notify the payees in writing that you're required to withhold 24% and explain how they can resolve the TIN mismatch. Keep copies of all B-notice correspondence as documentation of your compliance efforts.
If you've received a CP2100A and need help with compliance, call us at (813) 229-7100.