I. INTRODUCTION
Internal Revenue Service (IRS) regulations pertaining to information reporting, backup withholding and notices cover four specific circumstances when a bank (as “payor”) must backup withhold payments to a customer (as “payee”):
Upon the occurrence of any event described above, the bank must backup withhold payments of interest (or dividends, etc.). Backup withholding applies backup at a rate of 28% for payments after December 31, 2002, until December 31, 2010, and unless otherwise amended, at a rate of 31% thereafter. The funds withheld, at the time they are paid or credited to a customer’s account, may be used by the taxpayer as a credit against taxes owed. IRS Form 8109 is filed with backup withheld funds deposited with the IRS. The “Form 945” box should be checked on Form 8109. Backup withholding deposits are separate from payroll withholding deposits.
A TIN will either be a customer’s Social Security Number (SSN) or Employer Identification Number (EIN). Some customers may hold both numbers, e.g., a sole proprietorship. Some customers are exempt from backup withholding (e.g., corporations, governmental agencies and nonresident aliens, so long as there is appropriate documentation of exempt status).
II. CUSTOMER FAILURE TO PROVIDE A TIN (“A” - TYPE)
When a customer has no TIN, but is applying for one, the customer may note “Awaiting TIN” on Form W-9 which allows the bank to begin backup withholding when withdrawals are made during the first 60 days that the account is opened or backup withhold when the account is opened. If the customer’s TIN is not obtained prior to the required Form 1099 filing date, the bank is subject to a $50 fine for filing the information return without a TIN – even though backup withholding has commenced.
COMPLIANCE NOTE: To minimize account closing procedures, backup withholding or the risk of penalties, a bank could either refuse to open a reportable account without a TIN or open a noninterest bearing account until a TIN is furnished.
IRS regulations address the waiver of information reporting penalties due to “reasonable cause.” The reasonable cause standard replaces “due diligence” requirements for information returns filed after December 31, 1989. Note that due diligence continues as a “safe harbor” under the reasonable cause regulations (See below, “VII. Reasonable Cause Standard for IRS Penalties”).
Therefore, should the bank file an information return with an incorrect or missing TIN, the bank would be liable for a $50 fine unless it exercises due diligence in trying to obtain the TIN (e.g., having a customer certify the TIN on Form W-9; or closing a customer’s account with no TIN furnished after the 60 day “awaiting TIN” grace period).
III. BACKUP WITHHOLDING DUE TO INCORRECT NAME/TIN COMBINATION (“B” NOTICES)
IRS regulations pertaining to backup withholding requirements under Internal Revenue Code (IRC) § 3406(a)(1)(B) provides guidance concerning backup withholding due to IRS notification of an “incorrect name/TIN combination” (a combination of any name and TIN reported on an IRS information return that the IRS determines to be inaccurate). (Reference: 26 C.F.R. § 31.3406(d)-5).
A. Receipt of IRS “B” Notice
The IRS usually sends “B” notices to payor banks in September (dated October 1). “B” notices are generated for Forms 1099, 1099-B, -DIV, -INT, -OID and -MISC. A “B” notice is considered “received” on the later of the date under which it is sent or the date of actual receipt. The “B” notice means that the IRS has determined that the information return shows the payee has provided an incorrect name/TIN combination currently being used on an account.
B. Exempt Recipients
1. Generally
Payor banks are not required to notify, solicit or impose backup withholding due to “B” notices received on accounts held by exempt recipients (which include corporations, governmental entities, and nonresident aliens who provide a Form W-8). Also, payments otherwise not required to be reportable on IRS information returns are not subject to “B” notice regulations (e.g., if a Form 1099-INT was filed with an amount less than $10 and “B” notices were thereafter received, the “B” notices solicitation and backup withholding requirements would not apply).
2. Fiduciary/Nominee Accounts
Fiduciary and nominee accounts are excluded from “B” notice procedures and backup withholding requirements. A fiduciary or nominee account is defined as an account wherein at least one person named in the documents is identified as acting in the capacity as nominee or as administrator, conservator, custodian, receiver, tutor, curator, committee, executor, guardian, trustee, personal representative, or other fiduciary capacity recognized under governing law. Note, however, that such accounts are subject to the TIN solicitation rules under the “reasonable cause” standard. “B” notices continue to apply, as well as backup withholding, on accounts styled in the name of an estate or trust (e.g., “John Smith, Trustee for the Smith Family Trust” is exempt, but “Smith Family Trust” is not exempt).
3. Bank Input Errors
If the payor bank identifies name/TIN combination errors due to erroneous input by the bank, then the “B” notice solicitation and backup withholding are not required on such accounts.
C. Operational Issues
1. Account Identification
If the “B” notice contains an account number, backup withholding applies to that account alone. If the “B” notice does not contain an account number, then backup withholding applies to all reportable payments made to any account of the payee with an incorrect name/TIN combination that the payor bank can locate with “reasonable care.”
a. Account Number Included Where a bank has reported an account number and the IRS “B” Notice contains that account number, the bank’s requirement to identify the account will be satisfied by searching for the listed payee account number and comparing the surname on such account to the surname included on the “B” Notice listing/tape.
b. Reasonable Care When account numbers are not included on the “B” Notice listing/tape received from the IRS, the bank must search its computer or record systems for accounts that can be reasonably associated with the type of information return that triggered the “B” Notice. This will satisfy the bank’s duty to exercise reasonable care in identifying accounts for backup withholding purposes.
2. Joint Accounts
A joint account is subject to a “B” notice if the name/TIN combination on the “B” notice is the name/TIN combination used for reporting payments to that account (whether or not that is the first named account).
3. Use of Corrected Name or TIN
The bank must begin using new payee name/TIN information on all information returns filed within 30 calendar days after receiving the new information from a customer.
4. Dormant Accounts
A dormant account is subject to “B” notice requirements for three years after the last payment is made to it or three years after the “B” notice was received, whichever is later. Therefore, must be sent to dormant accounts and notices must be tracked for the “2-in-3 year Rule” (discussed below).
D. Customer Notification
Within 15 business days from receipt of a “B” notice, the bank must mail or deliver to its customer a notice stating that it has been notified by the IRS that the name/TIN combination furnished by the customer is incorrect and must be recertified. IRS regulations define business day as any day other than a Saturday, Sunday or legal holiday (including Nebraska statewide holidays).
Compliance Note: Start backup withholding within 30 business days from the date on the notice; stop backup withholding within 30 calendar days from the receipt of the stop notice.
Notice requirements and recertification rules differ depending on whether it is the first “B” notice received relative to an account or customer or the “second within three calendar years.”
E. First “B” Notice
Within 15 business days after receipt of a “first ‘B’ notice” relative to an account or a customer, a bank must notify the customer that it has been notified by the IRS that the customer’s name/TIN combination is inaccurate and provide the customer with a Form W-9 to recertify his or her TIN. The content of the bank-provided information to its customer is extensive. Specific verbiage is provided in IRS Revenue Procedure 92-32.
Banks must utilize the most current Form W-9 for first “B” notice certifications. For purposes of TIN certification, after a “B” notice has been received, the “Not Currently Subject to Withholding” designation is acceptable on Form W-9.
NOTE: Form W-9 “Awaiting TIN” certification is not a valid response to “B” notice solicitations on or after September 1, 1993.
F. Second “B” Notice
If the bank receives a second “B” notice relative to an account or a customer within three calendar years, the content of the notice the bank must provide to the customer is different than for a first “B” notice. The notice must be mailed within 15 days of receipt of the “B” notice. Specific verbiage of the 2nd “B” notice is provided in IRS Revenue Procedure 92-32.
A “B” notice recipient must provide a copy of his or her actual “B” notice to the SSA or IRS, as appropriate, in order to have his or her TIN certified.
SSA Form 7028 or IRS Form 147-C must be received from the SSA or the IRS that validates a customer’s TIN in order to prevent or stop bank-up withholding.
Non-individuals or sole proprietors receiving 2nd “B” notices were once required to provide a Form W-9, in addition to IRS Form 147-C, to prevent or stop backup withholding. Although still recommended, it is no longer required procedure.
G. First and Second “B” Notice Compliance Issues
1. Notices
Payor banks are only required to include the date that backup withholding will begin on the notification and are no longer required to include the official IRS “notice date” on “B” notices to payees. The bank may omit, revise, or add material to the official text of the “B” notice, if doing so is clearly appropriate and limited to those situations reflecting the particular status of the payee or the payor bank’s practices.
2. Envelopes
Envelopes used for mailing “B” notices may now state “Important Tax Document Enclosed” or “Important Tax Return Document.” This change enables the bank to use the same envelopes for 1099 and “B” notices.
Banks are no longer required to provide return envelopes to payees when performing “B” notice solicitations.
H. “2-in-3-Year Rule”
The “2-in-3-year Rule” applies when two “B” notices, with respect to the same account, have been received in any two calendar years during a rolling three-year calendar period. The rule requires the payor bank to continue backup withholding until notified to stop. In other words, if the bank received two “B” notices for the same account or customer within a three year rolling calendar year, it must send the customer the 2nd “B” notice text to inform him or her that backup withholding will begin within 30 days and that the bank cannot stop backup withholding until it is notified by the IRS or the SSA that a correct TIN has been furnished.
I. Backup Withholding
After the close of 30 business days after receipt of a “B” notice from the IRS, the bank must begin backup withholding on all reportable payments to the customer’s account for which a “B” notice was received or all of the customer’s accounts if no specific account is listed, unless the customer has recertified his or her TIN on or before that date. For the first “B” notice, a customer may recertify his or her TIN by providing the bank with a new Form W-9 certifying a TIN. A customer may recertify the TIN which the IRS said was erroneous.
For a second “B” notice, the bank may not accept a W-9, but may only accept a Form SSA-7028 from the SSA (if the incorrect TIN was a SSN) or IRS Letter 147C from the IRS (if the incorrect TIN was an EIN). It is the customer’s responsibility to apply for and obtain the correct form.
The bank may begin backup withholding at any time after receipt of a “B” notice from the IRS relative to an account or a customer; however, backup withholding must begin after the close of business on the 30th business day following receipt of the notice. If backup withholding begins, it must end within 30 calendar days after the bank receives proper certification of a customer’s TIN.
Civil and criminal penalties apply for failure to backup withhold when required. Also, the bank is liable for the amount that should have been withheld.
IV. NOTIFICATION OF CUSTOMER NONREPORTING, FAILURE TO REPORT OR UNDERREPORTING (“C” NOTICES)
The IRS may notify the bank to backup withhold all future payments to a customer if the IRS determines failure on the customer’s part to report interest income or the customer underreports such income. Regulations effective on January 1, 1997, implement IRC § 3406 and address this “C” - type of backup withholding and the “C” Notice procedures.
A. General
The IRS will notify a payor bank in a “C” Notice form letter, that the customer has underreported income and that the bank should commence backup withholding. The “C” notice includes the customer’s name, TIN and address and may also include the customer’s account number if the bank submitted the information to the IRS. The “C” notice will have been preceded by four notices from the IRS to the customer, over a 120 day period, with no response from the customer.
B. Receipt of IRS “C” Notice
Upon receiving a “C” notice, the bank must identify the customer and customer accounts subject to backup withholding. “C” notices will be generated for Forms 1099-DIV, -INT and -OID. Unlike “B” notices, 1099-MISC and -B and “window transactions” do not apply to “C” notices.
The bank must use “reasonable care” in identifying accounts with the same TIN as shown in the “C” notice from the IRS. When the TIN does not match with the “C” notice, that account should not be subject to backup withholding. When no account is indicated for a customer, no further action is necessary on the part of the bank. The bank does not have to backup withhold on dormant accounts. For joint accounts, the bank must backup withhold for the payee whose name and TIN combination is used for reporting purposes, whether or not that account lists the payee first.
C. Opening of New Accounts After Receipt of “C” Notice
If the bank knows that a customer is subject to “C” notice backup withholding, the bank must withhold funds generated by future opened accounts if:
D. Bank’s Response to the Customer Subject to the “C” Notice
The bank must send a “C” notice, by First Class mail to the customer’s last known address, informing the customer that:
“C” notice backup withholding must begin within 30 days of the bank’s receipt of the “C” notice from the IRS.
E. “Stop” Notice
To stop backup withholding, the bank must receive one of three forms, as follows:
Stop backup withholding within 30 calendar days from receipt of notice.
V. CUSTOMER FAILURE TO CERTIFY NOT SUBJECT TO BACKUP WITHHOLDING (“D” - TYPE)
Upon opening an account, the new customer must certify his or her TIN and also certify that he or she is not subject to backup withholding. IRS regulations require only one Form W-9 per customer no matter how many accounts are held at the bank.
Should a customer refuse to certify he or she is not subject to backup withholding, the bank must backup withhold all interest payments to the customer until a proper certification is completed.
COMPLIANCE NOTE: The bank could either refuse to open accounts for customers refusing to certify or offer to open only non-interest bearing accounts.
VI. ERRONEOUS BACKUP WITHHOLDING
In cases involving backup withholding that was erroneously imposed, the bank may refund the amounts withheld so long as the refund is made prior to December 31 of the year in which the incorrect withholding occurred. The bank may recredit the customer’s account or reimburse the customer by cash or check. Note that the bank will adjust its Form 945, reduce its deposit with the IRS by the amount of the refund, and correct the customer’s appropriate 1099 to show there was no backup withholding for which the customer would have been given a credit.
VII. REASONABLE CAUSE STANDARD FOR IRS PENALTIES
A. Rules Relating to Information Returns
IRC § 6721 imposes a penalty of $250 for every information return for which there is a failure to timely file or a failure to include complete and correct information. If an information return is filed both late and with incorrect or missing information, no more than one penalty will be imposed with respect to such a return.
IRS regulations provide that a failure to timely file includes a failure to file in the required manner, such as on magnetic media or in other machine-readable form (e.g., an error on a magnetic media submission to the IRS which prevents processing by the IRS may constitute a failure to timely file; however, if information is set forth on the wrong field of the magnetic media submission, such an error may constitute a failure to timely file or a failure to include correct information depending upon the extent of the failure). Under IRC § 6011(e)(2), a bank required to file at least 250 information returns must file on magnetic media.
IRC § 6721 provides a time-sensitive, tiered penalty structure under which the $250 penalty is reduced to $50 if a failure is corrected within 30 days of the required filing date or reduced to $100 if a failure is corrected after the end of such 30-day period, but on or before August 1 of the year in which the return is required to be filed. Due to this tiered penalty structure, it’s possible for a return to have two failures subject to different penalty amounts (e.g., a return filed within 30 days of the required filing date contains incorrect information that is not corrected by August 1). In such a case, the higher of the two penalty amounts will be imposed.
IRC § 6721 provides a de minimis exception to the penalty for failure to include complete or correct information (but not the penalty for late filing) where the bank (called a “filer” in the regulations) corrects such failures by August 1. That is, if there is only a de minimis number of failures (defined as the greater of 10 or one-half of one percent of all returns required to be filed), no penalty under IRC § 6721 will be imposed if the filer corrects such failures by August 1. Relief is available for a de minimis number of failures regardless of the total number of returns the bank files late or with incomplete or incorrect information.
IRC § 6721 limits the aggregate penalty amounts that may be imposed on a bank with respect to information returns filed in any calendar year. The penalty amount for all failures for which the first-tier $50 penalty would be imposed is capped at $500,000. The penalty amount for all failures for which the second-tier $100 penalty would be imposed is capped at $1,500,000. The penalty for failures for which the unreduced $250 penalty would be imposed is capped at $3,000,000. In no event will the total amount of penalties imposed on any filer under § 6721 for any calendar year exceed $3,000,000.
The aggregate penalty limits are reduced for certain small businesses meeting the “gross receipts test” (average annual gross receipts for the most recent three taxable years do not exceed $5,000,000.) from $3,000,000 to $1,000,000; from $1,500,000 to $500,000 and from $500,000 to $175,000
Also, penalties for failure to timely file correct information returns may be waived if the bank shows that the failure was due to “reasonable cause” and not to willful neglect (See below, “C. Waiver for Reasonable Cause”).
Penalty mitigation rules apply only if the bank has not intentionally disregarded the information return filing requirements. A bank whose failures are due to intentional disregard is subject to a higher penalty per failure and does not receive the benefit of the first- and second-tier reduced penalties, the caps on aggregate penalties, and the de minimis rule. The regulations provide that intentional disregard is present if a person knowingly or willfully fails to comply with a reporting requirement, based on all the facts and circumstances, including: (1) whether failing to comply is part of the bank’s pattern of conduct; (2) whether the bank promptly corrects the failure upon discovery; and (3) whether the bank responds promptly to requests from the IRS to correct.
B. Rules Relating to Payee Statements
IRC § 6722 imposes a penalty of $250 for every payee statement (up to a maximum of $3,000,000 for any calendar year) that a bank furnishes late or on which the filer provides incomplete or incorrect information. The regulations provide that if a payee statement is furnished both late and with incorrect or incomplete information, no more than one $250 penalty will be imposed with respect to such a payee statement. Nevertheless, if information is provided to a payee on a composite statement that includes information that would otherwise be reportable on more than one payee statement, the penalty will be imposed as if the information had been furnished to the payee on separate statements. As with information returns, the regulations also provide that a failure to include complete and correct information does not encompass inconsequential errors or omissions. Payee statements are generally required to be furnished by January 31.
IRC § 6722 provides a time-sensitive, tiered penalty structure under which the $250 penalty is reduced to $50 if a failure is corrected within 30 days of the required filing date or reduced to $100 if a failure is corrected after the end of such 30-day period, but on or before August 1 of the year in which the return is required to be filed. Due to this tiered penalty structure, it’s possible for a return to have two failures subject to different penalty amounts (e.g., a return filed within 30 days of the required filing date contains incorrect information that is not corrected by August 1). In such a case, the higher of the two penalty amounts will be imposed.
IRC § 6722 provides a de minimis exception to the penalty for failure to include complete or correct information (but not the penalty for late filing) where the bank (called a “filer” in the regulations) corrects such failures by August 1. That is, if there is only a de minimis number of failures (defined as the greater of 10 or one-half of one percent of all returns required to be filed), no penalty under IRC § 6722 will be imposed if the filer corrects such failures by August 1. Relief is available for a de minimis number of failures regardless of the total number of returns the bank files late or with incomplete or incorrect information.
If a bank’s failure to provide timely correct payee statements is due to intentional disregard of the payee statement filing requirements, a higher penalty is imposed and the $3,000,000 cap does not apply. The regulations provide that in determining whether such a failure is due to intentional disregard, rules similar to the intentional disregard rules for information returns apply.
C. Waiver for Reasonable Cause
Penalties may be waived if the bank shows that the failures are due to “reasonable cause” and not to willful neglect. The regulations provide that such reasonable cause is present if the filer shows that it acted in a responsible manner both before and after the failure occurred and establishes further that either (1) there are significant mitigating factors for the failure or (2) the failure arose from events beyond the filer’s control.
In addition, wholly apart from whether the conditions described above have been met, a payor bank will have established reasonable cause if it complies with previous due diligence requirements.
D. Significant Mitigating Factors
The regulations provide that significant mitigating factors include (1) the fact that the filer is filing the particular type of return or particular type of statement with respect to which the penalty arises for the first time in the year in which the failure occurs or (2) the fact that the bank has an established history of compliance with the information reporting requirement with respect to which the failure occurs. In determining whether such an established history is present, significant consideration is given to whether the bank has incurred any penalties for failures relating to the information reporting requirements in prior years, and if such penalties have been imposed, the extent of the bank’s success in lessening its error rate from year to year.
E. Events Beyond the Bank’s Control
The regulations provide that events deemed to be beyond the bank’s control include (but are not limited to) the following: (1) the unavailability of the relevant business records, whether as a result of a casualty, a change in the governing law with which, as a practical matter, the filer cannot timely comply, or the unavoidable absence of a person with the sole responsibility for filing (or furnishing a payee statement); (2) an undue economic hardship for filing on magnetic media, which must be established by a showing that the bank lacks the necessary hardware and was unable to contract out the filing at other than a prohibitive cost; (3) the bank’s good faith reliance on erroneous written information furnished by the IRS, provided that the bank furnished all of the relevant facts to the IRS in seeking the information relied upon; (4) the bank’s good faith reliance on an agent who was engaged sufficiently in advance to permit timely filing and whom the bank properly monitored; and (5) the failure of a payee or other person to provide the bank correct information with respect to the return or payee statement.
F. Acting in a Responsible Manner
To establish that it has acted in a responsible manner, a bank must show: (1) that it used reasonable care in obtaining and handling the necessary account information and (2) that it made efforts to avoid and correct the failure, such as requesting extensions of time to file and attempting to prevent the failure if it was foreseeable, removing the cause of the failure once it occurred, and correcting the failure as promptly as possible.
The regulations provide that a bank seeking to establish reasonable cause due to the failure of a payee or other responsible person to provide a correct TIN can establish that it acted in a responsible manner only if it can show: (1) that it solicited the TIN at the time the payee’s account was opened (or the transaction giving rise to the reporting requirement occurred) and (2) that, if the TIN was missing or the filer was notified that the TIN was incorrect, it made additional solicitations at prescribed times after the initial solicitation. The regulations permit solicitations conducted by mail or, under certain circumstances, by telephone. The regulations state that if a bank fails to make a required solicitation in the required time, it may satisfy the solicitation requirement by performing solicitations in the proper manner in subsequent years. In such case, penalties will be imposed for those years in which the bank has not yet satisfied the solicitation requirement.
G. Conclusion
Although the reasonable cause regulations do not resolve all issues, banks now have additional defense options available, which was not the case under previous due diligence and penalty rules.
FIRST “B” NOTICE
IMPORTANT TAX NOTICE * * * * * * * * * * * * * * * * * * * * *ACTION IS REQUIRED
We need a Form W-9 from you within 30 days
Backup Withholding Warning!
Account Number_________________________________
Current Name on Account
Current TIN on Account
The Internal Revenue Service (IRS) has notified us that the taxpayer identification number (TIN) on your account with us does not match their records. The IRS considers a TIN as incorrect if either the name or number shown on an account does not match a name and number combination in their files or the files of the Social Security Administration (SSA). If you do not take appropriate action to help us correct this problem by [Insert the date after which you will begin backup withholding (which may be no later than 30 business days after the date that you received the B Notice from the IRS (or a broker))], the law requires us to withhold 20 percent of the interest, dividends, and certain other payments that we make to your account. This is called backup withholding.
In addition to backup withholding, you may be subject to a $50 penalty by the IRS for failing to give us your correct name/TIN combination. This notice tells you how to help us make your account records accurate and how to avoid backup withholding and the penalty.
Why your TIN May Be Considered As Incorrect.
An individual’s TIN is his or her social security number (SSN). Often a TIN does not match IRS records because a name has changed through marriage, divorce, adoption, etc. and the change has not been reported to SSA, so it has not been recorded in SSA’s files.
Sometimes an account or transaction may not contain the correct SSN of the actual owner. For example, an account in a child’s name may reflect a parent’s SSN. (An account should be in the name and SSN of the actual owner.)
What You Need To Do
Individuals
If you have never been assigned a social security number (or if you lost your social security card and do not know your SSN):
1. Call your local SSA office and find out how to obtain an original (or a replacement) social security card. Then apply for it.
2. Read the enclosed Form W-9; write the words “applied for” on the form; sign it, and return it to us. This is called an awaiting TIN certificate and applies only to those persons who have never been issued a SSN.
3. When you receive your social security card, send us another Form W-9 with your SSN and name as shown on the card. An awaiting TIN certification will only stop or prevent backup withholding before September 1, 1993. If you already have a social security number:
Compare the name and SSN on your account with us (shown on page ____) with the name and SSN shown on your social security card. Then use the chart below to decide what action to take.
IF----
1. The last name and SSN on your account agree with the last name and SSN on your social security card
2. The SSN on your account is different from the SSN on your social security card, but the last name is the same
3. The last name on your account is different from the last name on your social security card, but the SSN is the same on both
Then----
1. Contact your local SSA office to ascertain whether the information on SSA’s records is different from that on your social security card, and to resolve any problem. Also, put your name and SSN on the enclosed Form W-9 following the instructions on the form. Sign the Form W-9 and send it to us.
2. Put your name and SSN, as shown on your social security card, on the enclosed Form W-9, following the instructions on the form, sign it, and send it to us. You do not need to contact SSA.
3. Take one of the following steps (but not both):
(a) If the last name on your account is correct, contact SSA to correct the name on your social security card. Put your SSN and name shown on your account on the enclosed Form W-9 following the instructions on the form, sign it, and send it to us.
(b) [Optional language: If you are not able to contact SSA at this time, you can provide us with both last names. Put your SSN and the name shown on your social security card plus the last name shown on your account (in that order) on the enclosed Form W-9 following the instructions on the form, sign it,, and return it to us. For example, if your social security card lists your maiden name, give us your SSN and your name in the following order: First/maiden/married name.
4. Both the last name and SSN on your account are different from the last name on your social security card.
Please note, however, that you should contact SSA as soon as possible so they can correct their records.]
(b) If the last name on your social security card is correct, put that name and your SSN on the enclosed Form W-9 following the instructions on the form. Sign it, and return it to us. You do not need to contact SSA.
4. (a) If the last SSN on your account are name and SSN on your different from the last social security card are name on your correct, social security card--put that name and SSN on the enclosed Form W-9 following the instructions on the form. Sign it and send it to us. You do not need to contact SSA.
(b) If the last name on your account and the SSN on your social security card are correct, follow the procedure in section 3(a) above. Be sure to put the name shown on your account and the name shown on your social security card on the Form W-9.
Once you have resolved what your correct name and TIN combination is, you must provide this information to us (and all your other payors) for all of your accounts to avoid a problem in the future. If you are required to visit an SSA office, take this notice, your social security card, and any other related documents with you. Before you go, you should call SSA so that they can explain what other documents you need to bring.
Instructions for Nonindividuals and Certain Sole Proprietors
For most nonindividuals (such as trusts, estates, partnerships, and similar entities), the TIN is the employer identification number (EIN). The EIN on your account may be incorrect because it does not contain the number of the actual owner of the account. For example, an account of an investment club or bowling league should reflect the organization’s own EIN and name, rather than the SSN of a member. Please put the name and EIN on the enclosed Form W9, sign it, and send it to us.
A sole proprietor must furnish his or her individual name and either his or her SSN or the EIN for his or her sole proprietorship. In addition to his or her individual name, the sole proprietor may also furnish the business name for the sole proprietorship, provided his or her individual name is listed before the business name. A sole proprietor must not furnish only the business name. Please put the individual name and SSN or EIN on the enclosed Form W-9, sign it, and send it to us.
Important Reminder!
YOU MUST SEND US A SIGNED IRS FORM W-9 BY [Insert the date after which you will begin backup withholding (which may be no later than 30 business days after the date that you received the B notice from the IRS (or a broker))] even if the name and number (SSN or EIN) on your account with us match the name and number (SSN or EIN) on your social security card or the document issuing you an EIN. If we do not receive your Form W-9, and any other documents that we need to change the name or TIN (or both) on your account, we are required by law to withhold 20 percent from any reportable payment that we pay to your account after [Insert the same date as the one inserted at the beginning of this paragraph.] until we receive the necessary documents.
A Form W-9 is enclosed for your convenience, as well as any additional documents allowing us to change the name/TIN combination on your account.
SECOND “B” NOTICE
IMPORTANT TAX NOTICE * * * * * * * *ACTION IS REQUIRED
YOU MUST HAVE THE IRS OR SSA VALIDATE YOUR
TAXPAYER IDENTIFICATION NUMBER
AND RETURN IT TO US WITHIN 30 DAYS
Second Backup Withholding Warning!
Account Number
We have received notice from the Internal Revenue Service (IRS) twice within 3 years stating that the combination of the name and taxpayer identification number (name/TIN combination) on your account with us is incorrect. (Your accounting number, current name on the account, and current taxpayer identification number (“TIN”) on the account are shown above.) A name/TIN combination is incorrect if it does not match a name/TIN combination shown on the records of the Social Security Administration (SSA) or the IRS.
You should follow the instructions below to correct this problem and send the corrected information to us by [Insert the date after which you will begin backup withholding (which may be no later than 30 business days after the date that you received the second B notice from the Service or a broker)]. If we do not have the correct information by that date, the law requires us to withhold 20 percent of the interest, dividends and certain other payments that we make to your account after that date.
Section 3405 of the Internal Revenue Code requires that we withhold 20 percent in tax, called backup withholding, when you do not give us your correct name/TIN combination. Because of the notices we received from the IRS, we are now required to disregard any future name/TIN combination you furnish us for your account (whether or not you certify your TIN under penalties of perjury) unless the SSA (or, in the case of an incorrect employer identification number, the IRS) validates your name/TIN combination. Also, the IRS may charge you a $50 penalty for failing to provide us with your correct name/TIN combination.
Follow the instruction below to correct your account record to avoid backup withholding on your account (or to stop it once it has begun) and to avoid the penalty.
Instructions for Incorrect Social Security Numbers
If the incorrect TIN you furnished us is a social security number, you must:
1. Contact your local SSA office by telephone and ask what you need to do to obtain a validated social security number for backup withholding tax purposes;
2. Give a copy of this notice to the SSA; and
3. Request and authorize the SSA to send From SSA-7028. Notice to Third Party of Social Security Number Assignment, directly to us with a copy of this notice attached.
Nonindividuals or Certain Sole Proprietors
Instructions for Incorrect Employer Identification Numbers.
If the incorrect TIN you furnished us is an employer identification number, you must
1. Write the Internal Revenue Service Center (Attn: Entity Section) where you file your income tax return, and ask the IRS to send you a Letter 147C;
2. Enclose a copy of this notice in your letter to the Internal Revenue Service Center; and
3. When the IRS sends you the Letter 147C, send it to us with a copy of this notice attached.