Issuing 1099’s in January may seem like it was months ago but eventually the IRS sorts through all of the forms and is able to identify mismatches or missing information on the 1099’s that were issued. For many businesses, the result is often an IRS Notice CP-2100A. While this notice does include instructions on steps to take, often these directions are somewhat confusing and may leave the recipient with more questions.
To start here are some abbreviations that will be referenced:
TIN – taxpayer identification number;
EIN – employer identification number;
SSN – social security number
You received this notice for two reasons:
- Either an incorrect taxpayer identification number (EIN or SSN) was listed on the recipients Form 1099 or the payee provided an incorrect TIN or SSN or perhaps both problems exist. Often times these are clerical errors by the issuer or transposition errors, usually unintentional.
- No TIN/SSN was listed on Form 1099. The ideal solution to this problem is to obtain a signed W-9 Form from each contractor prior to beginning a project or at a minimum before making the first payment. However, since we do not live in a perfect world and sometimes the timing of things does not allow for best practices, the end result is often finding yourself at year end and not being able to obtain the missing information so a 1099 is issued without it.
What to do:
- If your notice states Missing TIN(s) in the header then a TIN/SS was never provided. The following are courses of action you can take:
- Review to see if you have a W-9 on file with the specific contractor. If not, get one as soon as possible
- If you have a W-9 on file, review it to see if the missing information was provided. If so, update all your records according.
- If you have made attempts to obtain a W-9, keep records, (emails or written requests) to demonstrate to the IRS that you have attempted to get the missing information
- If the contractor is still receiving payment from you, you can start to backup withhold. If you choose this course of action, seek additional advice on what Forms and communication is required.
- If your notice states Incorrect Name/TIN(s) then the information provided does not match what the IRS has on file for that contractor. The following are steps you can take:
- Check your records to confirm the information. If you have a W-9 on file and there was a transposition of numbers, make sure you update all records to correct information. If not, contact the contractor for a new W-9 form.
- Sometimes a SSN is given with a business name or an individual’s name with an EIN. The number of digits is the same but the format matters. XX-XXXXXXX or XXX-XX-XXXX. Check with your contractor to see if you should be paying the business name with the correct EIN number or using the individual’s name with the SSN. Again – a W-9 would clarify any confusion.
- If you have attempted to obtain a W-9, keep records, (emails or written requests) to demonstrate to the IRS that you have tried to obtain the correct information. You may have to issue a ‘First B Notice’ to inform the contractor that backup withholding will being if a current W-9 is not provide in a timely manner.
- Consult additional advice on next steps if you can still not receive the requested information.
1099 season is quickly approaching for 2021, so start now to make sure your records are complete and accurate.