Two major IRS notices that taxpayers may receive regarding incorrect Taxpayer Identification Numbers (TINs) reported on tax documents are the IRS Notice 972CG, also called a P-Notice, and an IRS Notice CP2100, or B-Notice. It is important to know what these notices can mean and how to respond, both of which can save fines and make for a more efficient future KYC/KYB (Know Your Customer/Know Your Business) compliance process.
Learn the difference between P-Notices and B-Notices, when and why the IRS sends these notices, plus what to do if you receive one. We will also touch on how TIN validation and EIN lookup tools can perform due diligence to avoid incurring such notices or penalties.
What is IRS Notice 972CG, otherwise known as a P-Notice?
Notice 972CG, often referred to as a P-Notice, is sent to notify businesses of potential penalties related to missing or incorrect TINs on filed information returns, such as Form 1099. This notice is part of the IRS penalty process and informs the business of proposed fines due to inaccuracies in the TIN information provided.
Purpose: Imposes or proposes penalties for inaccurate TIN information.
What it means: The IRS found discrepancies and may impose a penalty if corrections are not made or justified.
When are P-Notices sent out by the IRS?
P-Notices are generally issued around 18 months following the filing of the original information, such as Form 1099. The IRS typically sends these notices each year in late summer or early fall so that they have had time to review last year’s taxes and identify discrepancies.
What should you do if you receive a P-Notice?
On receipt of a 972CG notice, it becomes very crucial for the business to proceed without delays in order to reduce penalties. Start by reviewing the IRS notice to determine what TINs are incorrect and any proposed penalties. Identify the TINs you have in your records and check if there are any mistakes.
What is IRS Notice CP2100, otherwise known as a B-Notice?
Notice CP2100, also known as a B-Notice, alerts businesses that the TINs they submitted for certain payees do not match IRS records. Unlike the 972CG, a B-Notice is a warning rather than a penalty notice, and it requires businesses to take corrective actions by obtaining accurate TINs from the payees involved.
Purpose: Warns of incorrect TIN/name combinations.
What it means: The IRS found mismatched TINs, and businesses must follow up with payees to obtain correct information.
When are B-Notices sent out by the IRS?
IRS sends B-notices, or Notice CP2100, in the October or November of the year after filing information (such as Form 1099). Those notices alert businesses about mismatched TINs they reported to the IRS records. When businesses receive a B-Notice, they must follow up with the payees involved to get the correct TINs and usually request the payee fill out a Form W-9.
However, it is critical that these matters be resolved quickly to avoid penalties and possible backup withholding obligations due to non-compliance. This will also ensure good records for future filings so the IRS does not send another notice.
What should you do if you receive a B-Notice?
Businesses that receive a B-Notice must act quickly to resolve TIN mismatches. The notice will include the names of payees (a financial institution, business, or individual) whose TIN does not match the records. Contact these payees as soon as possible to obtain their correct information, typically by requesting a new Form W-9.
According to IRS rules, the taxpayer must first request the proper TIN within 15 days of receiving the B-Notice. Upon receiving a second B-Notice for the same payee with an uncorrected TIN discrepancy, the business must begin backup withholding in the next payment to that payee. Taking immediate action prevents more IRS penalties from piling up.
Prevent notices: The importance of TIN matching validation
To avoid B-Notices and subsequent P-Notices, accurate TIN matching is essential. EINsearch offers tools that simplify this process. With Real-Time TIN Validation, businesses can enter the TIN & business (or person’s) name to instantly see if it matches IRS records, ensuring data accuracy and preventing fraud.
For larger validation needs, our Batch TIN Matching service allows businesses to automate the process—making it ideal for high-volume TIN files that require validation. With an average turnaround time of 72 hours, EINsearch.com’s Batch TIN Matching solution is particularly valuable during tax season, helping to eliminate the late nights and long hours associated with manual validations. Most importantly, it reduces the risk of last-minute errors and the potential for IRS penalties. If you’re pressed for time, Bulk TIN Matching enables you to quickly validate TINs, sparing you the need for manual processing.
EINsearch also offers an EIN lookup database with over 20 million validated EINs, perfect for finding vendor and subcontractor EINs quickly, supporting a smooth, compliant filing process while minimizing risk of penalties.
Summary
Mismatched, missing or incorrect TINs on your filings can lead to IRS notices — these are known as P-Notices, and B-Notices. Resolving these matters is critical to avoid penalties and backup withholding. With TIN matching validation conducted and iterations completed before the start of tax season, businesses have the ability to mitigate these notices in advance.
From Real-Time TIN Validation to Bulk TIN Validation, EINsearch provides the most up-to-date tools that will guarantee accurate data with seamless tax filings. Moreover, EINsearch provides an EIN lookup database for over 20 million records to help validate EINs for vendors, subcontractors and employees. Regardless of what you need, EINsearch can help you automate your KYC/KYB compliance processes.