What This Notice Means
This notice goes to a payer, such as a bank, brokerage, or cooperative, not to the taxpayer who owes. It tells you to begin backup withholding on interest and dividend income for the payees listed on the notice. Those taxpayers owe money to the IRS, and the withholding helps pay their balances.
What You Must Do
- Start backup withholding on dividends, patronage dividends, and interest you pay to the taxpayers listed on the notice.
- Begin within 30 days of the notice date.
- Continue until the IRS tells you in writing to stop, or the payee shows you written certification from the IRS that they're no longer subject to backup withholding.
- Report the withholding on Form 945, Annual Return of Withheld Federal Income Tax.
Use the withholding rate stated on your notice.
What Happens If You Don't
Failing to withhold as instructed may result in a tax liability for you, the payer, along with civil or criminal penalties. The IRS points payers to Internal Revenue Code sections 3403, 6651, 6656, 7201, 7202, and 7203 on this point.
Put simply, if you don't withhold, the IRS can come after you for the tax you should have taken.
Protect Payee Information
The names on this notice are confidential tax information. Unauthorized disclosure can expose you to civil damages under Internal Revenue Code section 7431. Limit access to the people who need it to set up the withholding.
Practical Steps
- Match each listed payee to your account records right away.
- Set up the withholding in your system before the 30-day deadline.
- Keep the notice and a record of when withholding began for each payee.
- Watch for a CP544, which tells you when to stop.
If your business received a CP543 and has questions about its obligations, call us at (813) 229-7100.