When Is 1099 Backup Withholding Required

On Demand Webinar

Webinar Details $219

  • Rated:
  • Webinar Length: 100 Minutes
  • Guest Speaker:   Steven Mercatante
  • Topic:   Taxation and Accounting
  • Credit:   CPE 2.0, ATATX 1.5
All Access Membership

IRS due diligence rules are more complicated than ever. Whether you are new or seeking an update this course will provide CPA’s, Accounts Payable, Payroll, and Tax professionals with plain English guidance to help break down IRS backup withholding and B-Notice situations.

The program will discuss the solicitation process including solicitation using and analyzing Form W-9, annual solicitations, B-notices and solicitations in response to IRS notices, and what to do when the vendor does not provide a TIN or provides an incorrect TIN. It will also cover how the IRS TIN Match system matches names and numbers and how you can leverage this assistance in preparing submissions to prevent false positive or negative responses from the system. It will cover how to submit TINs for verification and what to do when the system indicates a mismatch between the name and number of the vendor. This includes discussing procedures the payer must follow in issuing B-Notices to payees as well as the establishment of procedures for proper administration of backup withholding.


  • Reminders and what’s new 
  • IRS TIN matching process
  • Penalty abatement tips
  • Establishing reasonable cause
  • TIN solicitation best practices
  • TIN verification guidance
  • B-Notice response do’s and don’ts
  1. Introduction
  2. Overview 00:01:17
  3. The 1099-NEC Box 4 00:07:38
  4. The 1099-NEC 00:09:14
  5. The 1099-MISC Box 4 00:14:20
  6. The New W-9 00:21:31
  7. TIN’S! 00:35:08
  8. TIN’S! Cont’d 00:36:34
  9. The W-9 - When to Get an Updated Form W-9 00:39:10
  10. The W-9 - Payee Refuses to Provide a TIN 00:47:27
  11. The W-9 - Identifying Your Payment: Exempt Payments 00:48:46
  12. The W-9 - Identifying Your Payee 00:52:02
  13. The W-9 - “Problem Payee” Practices 00:53:57
  14. The W-9 - The LLC 00:56:00
  15. The W-9 - The LLC as the Disregarded Entity 00:56:41
  16. The W-9 - Tax Exempt Organization Search Tool 00:57:21
  17. TIN Validation - IRS TIN Match Program 00:59:01
  18. TIN Validation - The W-9 And Vendors 01:00:23
  19. TIN Validation - TIN Match Program 01:03:44
  20. Watch Out For The Middleman 01:06:33
  21. Backup Withholding Mechanics 01:08:28
  22. Backup Withholding Mechanics - Four Triggers 01:11:11
  23. Backup Withholding Mechanics -  B-Notices 01:12:43
  24. Backup Withholding & Corrections - Form 1099 Corrections 01:14:53
  25. Backup Withholding & Corrections - Tax Implications 01:21:19
  26. B-Notices & Backup Withholding - Reasons For B-Notices 01:22:42
  27. B-Notices & Backup Withholding - IRS Matching And Notice Dates 01:28:17
  28. B-Notices & Backup Withholding - 2nd Notice 01:32:04
  29. B-Notices & Backup Withholding - Due Diligence 01:
  30. Protect Yourself - 01:39:06
  31. Attendee Questions 01:40:18
  32. Presentation Closing 01:42:26
  • Audit 00:49:48, 00:52:35
  • Backup Withholding 00:01:04, 00:01:58, 00:04:34, 00:08:28, 00:19:41, 00:21:43, 00:25:41, 00:29:06, 00:43:43, 00:48:25, 01:08:32, 01:11:15
  • B-Notice 00:01:30, 00:03:18, 00:21:46, 00:33:09, 01:10:26, 01:30:50
  • DBA -Doing Business As 00:21:31
  • Department of Labor (DOL) 00:05:58
  • Disregarded Entity 00:24:47, 00:35:52, 00:56:41
  • Due Diligence 00:02:29
  • EIN 00:35:42, 00:36:41, 00:44:51
  • FATCA 00:27:06, 00:31:06
  • Form 1042-S 00: 00:29:00, 00:53:04
  • Form 1099-B 00:59:01
  • Form 1099-DIV 00:59:01
  • Form 1099-INT 00:59:01
  • Form 1099-K 00:15:21, 00:59:01
  • Form 1099-MISC 00:07:45, 00:17:26, 01:09:36, 01:12:56
  • Form 1099-NEC 00:07:48, 00:18:53, 01:09:06, 01:12:57
  • Form 1099-OID 00:59:01
  • Form 1099-PATR 00:59:01
  • Form 945 00:52:54, 01:09:47, 01:12:19
  • Form 990 00:58:18
  • Form W-8 00:28:59
  • Form W-9 00:02:11, 00:14:57, 00:21:35, 00:27:59, 00:30:16, 00:34:52, 00:40:38, 00:46:12, 00:50:12, 01:04:06, 01:29:06, 01:33:29
  • Independent Contractor 00:05:42, 00:10:18, 00:31:19
  • Information Returns Intake System (IRIS) 00:
  • Invoice 00:15:02
  • IRC 6050W 00:15:24
  • IRC Section 3406(a) 00:01:54, 00:47:54
  • IRC Section 6041(a) 00:01:47, 00:47:49
  • IRC Section 6109(a)(2) 00:01:48, 00:21:57, 00:36:31, 00:47:41
  • IRC Section 6721 00:48:00
  • IRC Section 6722 00:48:01
  • IRC Section 6724 00:29:49, 00:48:03, 01:06:56
  • Limited Liability Company (LLC) 00:24:45, 00:35:48, 00:44:32, 00:56:04, 00:57:09
  • Reasonable Cause 00:29:44, 01:06:55, 01:17:30
  • Sole Proprietor 00:24:48, 00:35:33, 00:46:46
  • Tax Exempt Organization Search Tool 00:59:08
  • Tax Gap 00:04:03
  • TIN 00:03:07, 00:22:05, 00:25:54, 00:35:15, 00:39:24, 00:43:36, 00:59:23, 01:04:55, 01:11:26, 01:16:46, 01:25:53, 01:28:58
  • TIN Match Program 00:59:12
  • Vendor 00:03:42, 00:10:18, 00:13:28, 00:19:43, 00:26:55, 00:31:22, 00:40:39, 00:44:44
  • CP-2100 01:26:41, 01:30:51
  • CP-2100-A 01:26:45

Audit: A formal examination of an organization's or individual's accounts or financial situation

B-Notice: A notice from the IRS stating that one or more tax ID numbers were missing from a 1099 or do not match the IRS records.

Backup Withholding: Backup withholding is the tax that is levied on investment income, at an established tax rate, as the investor withdraws it. Backup withholding helps to ensure that government tax-collecting agencies (such as the IRS or Canada Revenue Agency) will be able to receive income taxes owed to them from investors' earnings. (www.investopedia.com)

C-Notice: Backup withholding notice from the IRS stating that the non-employee has understated income and is subject to backup withholding.

CP-2100: It is a notice that tells a payer that he or she may be responsible for backup withholding. It is accompanied by a listing of missing, incorrect, and/or not currently issued payee TINs. Largevolume filers will receive a CD or DVD data file CP2100, mid-size filers receive a paper CP2100, andsmall filers receive a paper CP2100A.

CP2100-A: It is a notice that tells a payer that he or she may be responsible for backup withholding. It isaccompanied by a listing of missing, incorrect, and/or not currently issued payee TINs. Largevolume filers will receive a CD or DVD data file CP2100, mid-size filers receive a paper CP2100, andsmall filers receive a paper CP2100A.

D-Notice: If you received an LT16 A/D notice, it's because he IRS is trying to collect unpaid taxes from you and/or their files show they're missing tax returns from you. It is essential that you take action in order to avoid potential enforcement action, which can include seizing your assets or wages. Enforcement action could also include the filing of a notice of federal tax lien, which could affect your credit score and ability to borrow.

DBA -Doing Business As: Sometimes it makes sense for a company to do business under a different name. To do this, the company has to file what's known as a DBA, meaning "doing business as." A DBA is also known as a "fictitious business name," "trade name," or "assumed name."

Department of Labor (DOL): The United States Department of Labor is a cabinet-level department of the U.S. federal government responsible for occupational safety, wage and hour standards, unemployment insurance benefits, reemployment services, and some economic statistics; many U.S. states also have such departments.

Disregarded Entity: A disregarded entity refers to a business entity with one owner that is not recognized for tax purposes as an entity separate from its owner. A single-member LLC ( “SMLLC”), for example, is considered to be a disregarded entity. (www.pntax.com)

Due Diligence: Due diligence is a process or effort to collect and analyze information before making a decision or conducting a transaction so a party is not held legally liable for any loss or damage. The term applies to many situations but most notably to business transactions.

EIN: The Employer Identification Number, also known as the Federal Employer Identification Number or the Federal Tax Identification Number, is a unique nine-digit number assigned by the Internal Revenue Service to business entities operating in the United States for the purposes of identification.

FATCA: FATCA was enacted in 2010 by Congress to target non-compliance by U.S. taxpayers using foreign accounts. FATCA requires foreign financial institutions (FFIs) to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. (www.treasury.gov). FACTA (Fair and Accurate Credit Transactions Act) is an amendment to FCRA (Fair Credit Reporting Act ) that was added, primarily, to protect consumers from identity theft. The Act stipulates requirements for information privacy, accuracy and disposal and limits the ways consumer information can be shared.

Form 1042: Form 1042, also "Annual Withholding Tax Return for U.S. Source Income of Foreign Persons", is used to report tax withheld on certain income of foreign persons.

Form 1042-S: Form 1042-S is used to report amounts paid to foreign persons (including persons presumed to be foreign) who are subject to income tax withholding. For an individual taxpayer, Form 1042-S is a document provided to you (and the IRS) by the payer of the income reported.

Form 1099-B: Proceeds From Broker and Barter Exchange Transactions is an Internal Revenue Service (IRS) tax form that is issued by brokers or barter exchanges. The form lists the gains or losses of all broker or barter exchange transactions.

Form 1099-DIV : Form 1099-DIV: Dividends and Distributions is an Internal Revenue Service (IRS) form sent to investors who receive distributions from any type of investment during a calendar year. Investors can receive multiple 1099-DIVs. Each Form 1099-DIV should be reported on an investor's tax filing.

Form 1099-INT: Form 1099-INT is the IRS tax form used to report interest income. The form is issued by all payers of interest income to investors at year end and includes a breakdown of all types of interest income and related expenses. Payers must issue Form 1099-INTs for any party to whom they paid at least $10 of interest during the year.

Form 1099-K: A payment settlement entity (PSE) must file Form 1099-K for payments made in settlement of reportable payment transactions for each calendar year. A PSE makes a payment in settlement of a reportable payment transaction, that is, any payment card or third party network transaction, if the PSE submits the instruction to transfer funds to the account of the participating payee to settle the reportable payment transaction.

Form 1099-MISC: The Form 1099-MISC is an Internal Revenue Service (IRS) tax return document used to report miscellaneous payments made to nonemployee individuals, such as independent contractors, during the calendar year. (www.shrm.org)

Form 1099-NEC: In the context of 1099 tax filing, NEC stands for “Nonemployee Compensation” (the first letters of the three words None, Employee and Compensation). Most tax payers recognize NEC as box 7 on Form 1099-MISC. NEC is used to report income paid to independent-contractors / the-self-employed (referred to as 1099 employees for simplification purposes). So, while employers report income that gets paid to employees on Box 1 (Wages, tips, other compensation) of the W2 form, payers report income that gets paid to none-employees on Box 7 (NEC) of the 1099-MISC form. As an individual, if you received form 1099-MISC instead of Form W-2 then the payer did not consider you an employee and did not withhold income tax or social security and Medicare tax.

Form 1099-OID: Form 1099-OID is a tax form intended to be submitted to the Internal Revenue Service by the holder of debt instruments which were discounted at purchase to report the taxable difference between the instruments' actual value and the discounted purchase price.

Form 1099-PATR: File Form 1099-PATR, Taxable Distributions Received From Cooperatives, for each person to whom the cooperative has paid at least $10 in patronage dividends and other distributions described in section 6044(b), or from whom you withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.

Form 945: IRS Form 945 is titled Annual Return of Withheld Federal Income Tax. Form 945 is used to report withheld federal income tax from nonpayroll payments, including distributions from qualified retirement plans.

Form 990 : Form 990 (officially, the "Return of Organization Exempt From Income Tax") is a United States Internal Revenue Service form that provides the public with financial information about a nonprofit organization. It is often the only source of such information.

Form W-8: Form W-8 is filled out by foreign entities (citizens and corporations) in order to claim exempt status from certain tax withholdings. The form is used to declare an entity's status as non-resident alien or foreign national who works outside of the United States.

Form W-9: Form W-9 (officially, the "Request for Taxpayer Identification Number and Certification") is used in the United States income tax system by a third party who must file an information return with the Internal Revenue Service (IRS). It requests the name, address, and taxpayer identification information of a taxpayer (in the form of a Social Security Number or Employer Identification Number). - Wikipedia (https://en.m.wikipedia.org/)

IRC 6050W : Section 6050W requires information returns to be made for each calendar year by merchant acquiring entities and third party settlement organizations with respect to payments made in settlement of payment card transactions and third party payment network transactions occurring in that calendar year.

IRC Section 3406(a): Requires that, under certain circumstances, including the payee's failure to provide a TIN, the payer must perform backup withholding.

IRC Section 6041(a): Provides that persons engaged in trade or business must report certain payments on an information return.

IRC Section 6109(a)(2): Requires that a payee provide a TIN to the payer when the payment will be reportable on an information return.

IRC Section 6721: If an employer fails to file a correct Information, return by the due date, and cannot show reasonable cause, the employer may be subject to a penalty as provided under IRC Section 6721.

IRC Section 6722: IRC Sec. 6722 authorizes a civil penalty for failing to provide payees with correct copies of statements furnished to the IRS.

IRC Section 6724: I.R.C. § 6724(a) Reasonable Cause Waiver — No penalty shall be imposed under this part with respect to any failure if it is shown that such failure is due to reasonable cause and not to willful neglect.

IRS Notice 972CG: The IRS started mailing 972CG penalty notices in July 2013 regarding 1099's with missing or incorrect TIN/Name Combinations. A 972CG is a NOTICE OF PROPOSED CIVIL PENALTY. A simple way to prevent this costly penalty is to verify that your information is correct prior to filing.

Independent Contractor: An independent contractor is a person or entity contracted to perform work or provide services to another entity as a non-employee. As a result, independent contractors must pay their own Social Security and Medicare taxes. - Investopedia (https://www.investopedia.com/)

Information Returns Intake System (IRIS): The Information Returns Intake System (IRIS) Taxpayer Portal is a system that provides a no cost online. method for taxpayers to electronically file Form 1099 series. The Taxpayer Portal allows you to enter. data to create Forms 1099 by either keying in the information or uploading a .csv file.

Invoice: An invoice, bill or tab is a commercial document issued by a seller to a buyer, relating to a sale transaction and indicating the products, quantities, and agreed prices for products or services the seller had provided the buyer. Payment terms are usually stated on the invoice.

Limited Liability Company (LLC): An LLC is a corporate structure where members cannot be held accountable for the company’s debts or liabilities. This can shield business owners from losing their entire life savings if, for example, someone were to sue the company. Can be a single member (much like a sole proprietor) or a multi-member. It shares certain traits of both corporations as well as partnerships or sole proprietorships. It is not a corporation.

Reasonable Cause : Reasonable cause is based on all the facts and circumstances in your situation. The IRS will consider any reason which establishes that you used all ordinary business care and prudence to meet your federal tax obligations but were nevertheless unable to do so.

Sole Proprietor: A business that legally has no separate existence from its owner. The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts.

TIN: A Taxpayer Identification Number is an identifying number used for tax purposes in the United States and in other countries under the Common Reporting Standard. In the United States, it is also known as a Tax Identification Number or Federal Taxpayer Identification Number.

TIN Match Program: TIN Matching is part of a suite of Internet-based pre-filing e-services that allows “authorized payers” the opportunity to match 1099 payee information against IRS records prior to filing information returns.

Tax Exempt Organization Search Tool: Tax Exempt Organization Search helps users find information about a tax-exempt organization’s federal tax status and filings.

Tax Gap: The gross tax gap is the difference between true tax liability for a given tax year and the amount that is paid on time. It is comprised of the nonfiling gap, the underreporting gap, and the underpayment (or remittance) gap.

Vendor: A vendor is a person or business that supplies goods or services to a company. Another term for the vendor is the supplier. In many situations, a company presents the vendor with a purchase order stating the goods or services needed, the price, delivery date, and other terms.

Guest Speaker

  • Steven Mercatante

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