What This Notice Means

A payer asked the IRS for a list of payees who are currently subject to backup withholding because of underreporting. The CP546 is that list. You get it because you requested it.

It doesn't propose a change, ask for money, or set a deadline.

What to Do

  • Use the list to check that your backup withholding records match the IRS's records.
  • Protect the payee information on it.

Protect Payee Information

The names on this list are confidential tax information. Unauthorized disclosure can expose you to civil damages under Internal Revenue Code section 7431. Store it securely and limit access to the staff who need it.

About Backup Withholding

Backup withholding is a deduction from certain payments, mostly interest and dividends, that payers must take when the IRS instructs them to. The current rate is 24%, and it can change with the tax laws.

Payers continue withholding until the IRS instructs them to stop, or until the payee provides written certification from the IRS that they're no longer subject to backup withholding.

The IRS points payers to Internal Revenue Code sections 3403, 6651, 6656, 7201, 7202, and 7203 for the rules around backup withholding obligations. Publication 1335, Backup Withholding Questions and Answers, covers the process in plain terms.

Practical Steps

  • Compare the list to the payees you are currently withholding from.
  • If someone on the list isn't being withheld from, find out why. A missed CP543 instruction can create liability for the payer.
  • If you're withholding from someone not on the list, check whether you received a CP544 telling you to stop.
  • Keep the list with your backup withholding records.

If your business needs help with backup withholding obligations or other IRS notices, call us at (813) 229-7100.