October 11th, 2011 by 1099 News
Last week I drove into the parking lot at work and looked for a shaded parking spot to park my car since it was to be sunny and 80+ degrees that day. I found a spot under a bountiful tree that looked to be right for the job at hand. Later that evening when I left work I came upon my car only to find it covered in leaves from bumper to bumper. So much for the canopy which reminds me, it’s that time of the year again when the season turns from the summer heat to falling leaves, cooler temperatures and in some parts of the United States a brisk wind. Those of us who find ourselves in the tax information reporting business, that brisk wind isn’t just whipping outside our working walls but through our inbox. As the calendar turns to October, we know those chills down our spines can only be related to one thing, the arrival of the dubious CP2100 and CP2100A listings. More commonly referred to as “B” Notices, it represents the IRS’ equivalent of a midterm report card to the payer community responsible for tax information reporting. The final report card being the penalty notice process that occurs the following year.
The “B” Notices inform the payer of how many payee name and tax identification number (TIN) combinations were filed incorrectly due to a name\TIN mismatch, invalid TIN, or missing TIN for the previous tax year’s filing. There are two types; the CP2100, which arrives in an electronic format and represents over 250 name\TIN combinations that were filed incorrectly while the CP2100A represents 250 or less combinations which arrives in a paper listing format.
So how can the payer responsible for these notices stop the year over year onslaught of these notices?
Depending on how many show up at your front door, a scream might be advised, but more importantly a well thought out plan of attack is what is required to lower this risk to your business. The IRS has expectations on the payer to perform due diligence against each of these incorrect filings in order to correct future filings associated with these incorrect combinations. For those who have been handling “B” Notices for more than a handful of years you know that this used to be the payer community’s only means of knowing what the correct answers to this exam were. With the introduction of the IRS TIN Matching program many years ago, we now can take a proactive approach to gathering the correct name\TIN combinations rather than the reactive approach that had been afforded in years prior. The payer community should be taking full advantage of this IRS cheat sheet in their mission to perfect the TIN and Name data. As part of what I call a relentless pursuit of accuracy, I have found success in moving the timeline forward to when I seek this information. It starts when you set up brand new customers, vendors, merchants, agents etc. for the very first time in your systems. Speak with the department responsible for collecting and inputting new payee account information into your payment and management systems to validate the name and TIN information from the onset of the relationship. By implementing a validation step against the IRS TIN matching program while you are asking a vendor or customer for other forms to be completed, you will be doing so during a period in which you have this “soon to be” payee’s undivided attention. Get it right the first time!
If you are a client centric organization or one who strives at being cost conscious or both, collecting the correct information from the onset will save you inevitable business cycles downstream, reduce your reporting risk with the IRS, and provide your clients with a greater customer experience. What will it mean to you? It will mean that a cup of hot cocoa will be your answer to those fretted chills down your spine this time of year rather than a panicked scream.
Convey provides tax information reporting services and software to businesses to make IRS compliance clear and uncomplicated. U.S. federal tax advice contained in this web site is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter that is contained in this document. (iii) The taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.