As a small business owner or CPA filing 1099 forms, receiving an IRS CP2100 notice (commonly called a B-notice) can be alarming. This important document alerts you to discrepancies between the Taxpayer Identification Numbers (TINs) and names reported on your 1099 forms compared to IRS records. Understanding this notice and responding appropriately is crucial for maintaining compliance and avoiding costly penalties.
Why You Might Receive a CP2100 Notice as a 1099 Filer
The IRS issues CP2100 notices when they detect mismatches in your 1099 submissions. Common reasons for these discrepancies include:
- Incorrect TINs provided by contractors or vendors
- Typos when entering TIN information into your 1099 software
- Name changes not reported to the Social Security Administration
- Transposed numbers in the TIN
- Using a nickname or business name that doesn’t match official records
The Impact on Your Small Business
Ignoring a CP2100 notice can have serious consequences for your small business:
- Mandatory Backup Withholding: You’ll be required to withhold 24% from future payments to affected vendors
- Financial Penalties: Fines ranging from $60 to $330 per incorrect 1099, depending on when corrections are made
- Additional IRS Scrutiny: Unresolved TIN mismatches may flag your business for wider examination
- Administrative Burden: Follow-up notices and corrective actions create additional work during busy seasons
Step-by-Step Response Guide for Small Businesses
When your small business receives a CP2100 notice related to 1099 filings, follow these steps:
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Review Your Contractor Information
- Carefully compare the mismatched TIN/name combinations against your records
- Check if errors occurred during data entry or from illegible W-9 forms
- Verify if the business name or individual name format matches what was submitted
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Send B-Notices to Affected Contractors
- You have just 15 business days from the CP2100 notice date to send B-Notices
- For first-time notifications, request a new W-9 form from the contractor
- For second notifications (for the same contractor within a 3-year period), provide special instructions for TIN validation. Learn more in our B-Notice webinar.
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Implement Backup Withholding If Necessary
- If a contractor doesn’t respond within 30 days, you must begin withholding 24% from their payments
- Document when backup withholding began and maintain records of amounts withheld
- Report withheld amounts on your tax filings
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Update Your 1099 Records
- Promptly update your vendor database with corrected information
- Maintain documentation of all B-Notices sent and responses received
- File corrected 1099 forms as needed
Prevention Strategies for Future 1099 Filings
Prevent CP2100 notices with these proactive approaches:
Strengthen Your Onboarding Process
- Collect complete W-9 forms before making the first payment to any contractor
- Verify the legal name matches payment information (personal name vs. business name)
- Confirm the appropriate entity type is selected on W-9 forms
- Use TINCheck API to verify in real-time during your onboarding process
Verify TINs Before Filing Season
- Conduct TIN matching in spring and again in fall to catch discrepancies early
- Use TIN verification services before submitting Forms 1099-MISC, 1099-NEC, and other information returns
- Build verification into your standard operating procedures
- Utilize TINCheck Real-Time TIN
Leverage TINCheck, Powered by Sovos
- Use TINCheck to flag potential issues before submission
- Screen recipients against the IRS Name/TIN or Name/EIN database, the Death Master File (DMF), Office of Foreign Asset Control (OFAC) list, and 30+ global sanctions and watchlists.
- Take advantage of Bulk TIN matching capabilities
Common Questions from Small Businesses and CPAs
Q: What’s the difference between CP2100 and CP2100A notices?
A: The content and required response are the same. CP2100 notices typically go to businesses filing more than 250 mismatched returns, while CP2100A notices go filers with fewer mismatches.
Q: Do I have to send B-Notices for all contractors listed?
A: Yes, you must send B-Notices to every contractor listed on the CP2100 notice within 15 business days.
Q: How long must I continue backup withholding?
A: Continue backup withholding until the contractor provides a corrected W-9 with valid TIN information or until the IRS notifies you to stop.
Q: Will filing corrected 1099s eliminate the need for backup withholding?
A: No. Filing corrected 1099s is important, but you must still obtain a valid W-9 and/or begin backup withholding if the contractor doesn’t respond to your B-Notice.
Q: Can I email B-Notices to my contractors?
A: The IRS requires B-Notices to be sent by mail, not electronically.