What This Notice Means

This notice goes to a payer of interest, dividends, or patronage dividends. It tells you that the taxpayers listed on the notice are no longer subject to backup withholding. You no longer need to withhold from the payments you make to them.

What to Do

  • Stop backup withholding for the listed payees within 30 days of receiving the notice, or by January 1.
  • Report the withholding you already took on Form 945, Annual Return of Withheld Federal Income Tax.
  • Protect the payee information on the notice.

Protect Payee Information

The names on this notice are confidential tax information. Unauthorized disclosure can subject you to civil damages under Internal Revenue Code section 7431. Keep the notice in a secure place and share it only with the staff who need it to update the accounts.

About Backup Withholding

Backup withholding is withholding on interest and dividend income that a payer takes when the IRS instructs it to. The current rate is 24%, and it can change with the tax laws. A payee stays subject to it until the IRS instructs the payer to stop, or until the payee gives the payer written certification from the IRS. This notice is the IRS's instruction to stop.

Practical Steps

  • Match each listed payee to your account records.
  • Turn off the withholding in your system and note the date.
  • Keep the notice with the records from the original CP543 that started the withholding.
  • Make sure your year-end information returns correctly show the amounts you withheld before you stopped.

If a payee shows you a CP542, that is their own copy of the IRS notice saying they're no longer subject to backup withholding.

If your business has questions about backup withholding or other IRS notices, call us at (813) 229-7100.