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#135780 - 12/02/03 10:21 PM IRS Backup Withholding
Georgia Golfer Offline
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We get a notice from the IRS to start withholding, are we supposed to notify the customer or is that IRS's job?

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#135781 - 12/02/03 10:26 PM Re: IRS Backup Withholding
Still Developing Offline
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You can if you want, but generally the customer already knows.

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#135782 - 12/02/03 10:37 PM Re: IRS Backup Withholding
Elwood P. Dowd Offline
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It's your job to notify the customer if what you received is a "C Notice." The notice should contain instructions and the equivalent of a table of contents for your letter; there is no "model" letter from the IRS. Do not forward the notice itself to the customer.
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#135783 - 12/02/03 10:55 PM Re: IRS Backup Withholding
Georgia Golfer Offline
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It's weird, it's form CP-543 that no one at the phone number given on the letter has ever heard of. I've been reading about B-Notices and W-9's on the IRS website, but have not found a clear answer.

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#135784 - 12/03/03 03:06 PM Re: IRS Backup Withholding
John Burnett Offline
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In the past, we've taken the time to copy the IRS letter and forward it to the customer. If more than one customer is listed, we "mask" all the others when making the copy. It's a PITA, but it tends to get the point across.

We also include a letter from us, indicating we don't have any choice, yada yada, and the customer needs to contact the IRS to resolve the problem.

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#135785 - 12/03/03 03:23 PM Re: IRS Backup Withholding
Elwood P. Dowd Offline
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JMS and I have exchanged PM's. In the first line of his notice is a reference to 3406(1)(a)"(C)", so it is a C Notice. However, it apparently did not come with instructions. Since I'm in the habit of saying that instructions accompany the notice because they have in the past, I would appreciate being corrected by any of you who have the same experience as JMS.

Did you receive instructions?
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#135786 - 12/03/03 07:17 PM Re: IRS Backup Withholding
Tisa Offline
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Do you know the way to ...
I haven't gotten instructions with mine for the past few years. I've kept previous instructions, but rarely refer to them any more....

You are required to notify your customer, but only after you've made one payment that's subject to withholding. The IRS wants to get at least one payment before the customer "wakes up" and decides to close the account.

IRS Publication 1335 (Rev. 09-96) Underreporting Backup Withholding Questions and Answers has more details, but unfortunately it's not available on-line... You could probably call 1-800-TAX-FORM and request a copy.

Here are some highlights:

You must begin backup withholding (and use the current 28% rate, not the 30% it says in the letter) within 30 days after the Notice date.

Within 15 days after you make a payment subject to withholding, you must notify the taxpayer that backup withholding has been imposed.

You continue to backup withhold until you receive a notice from the IRS to stop.

The notice you send to the customer should state that:
1) you have received an IRS notice that the payee has underreported dividend and/or interest income.
2) you must now backup withhold dividend or interest payments to the payee
3) you must continue backup withholding until you receive a "determination letter" from the IRS to stop withholding
4) the payee may not certify to another payer that he or she isn't subject to backup withholding (a phrase on Form W-9) while he or she is subject to it.

You have to identify (and withhold on) all accounts the payee has with you, not just the ones listed on the C Notice.

If there are two names listed on the notice, you must identify (and withhold on) all accounts where either person is listed first.
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#135787 - 12/04/03 04:53 PM Re: IRS Backup Withholding
Georgia Golfer Offline
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Tisa, that sparks another question. On the IRS website there is a graph that shows the rate for backup for 02 & 03 at 30% and dropping 1% in 04& 05 & another for 06. Our system is defaulted to 28%, so the 30% threw me for a loop. Do you have citation for 28%? Thanks for the help.

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#135788 - 12/04/03 06:22 PM Re: IRS Backup Withholding
John Burnett Offline
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Here's a link to a recent Thread on this question exactly.

Bottom line -- it's 28%. Trust me!
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#135789 - 12/04/03 06:31 PM Re: IRS Backup Withholding
Queen Mum Offline
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OK
Hey, John, nice new picture!

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#135790 - 12/04/03 07:00 PM Re: IRS Backup Withholding
Georgia Golfer Offline
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John- I trust ya, thanks for all ya'll's help.

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#135791 - 12/04/03 07:13 PM Re: IRS Backup Withholding
Jill W Offline
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River Town
I also had a question this week about the Backup Withholding Rate. The reduction was announced in Internal Revenue Bulletin 2003-28. I believe it was on page 73 or 74 of that Bulletin.
IRBs can be found on the IRS website. Hope this helps you document the change.

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#135792 - 03/01/04 10:33 PM Re: IRS Backup Withholding
Anonymous
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If the IRS Notice contains an account number for a client, can't we assume that that account number is the only one required to have backup withholding administered? I checked the regulation, and it is very vague. Thanks!

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#135793 - 03/02/04 02:06 PM Re: IRS Backup Withholding
John Burnett Offline
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The IRS regulations require that you withhold on all interest and dividend payments you make to the customer. The account number that might come with the B notice or C notice is merely a pointer to one account that the IRS has in its records, due to your having included that account number in a recent 1099 filing. But withholding applies to the customer, not to the account.
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#1877696 - 12/11/13 04:27 PM Re: IRS Backup Withholding Georgia Golfer
jwhiz Offline
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We just received the same CP-543 as indicated in previous posts, in which we will begin backup withholding. Can we pay the 28% withholding the same way we transmit other backup withholding that is requested by our clients on their IRA's, etc via the IRS website under our TIN?
Last edited by jwhiz; 12/11/13 04:32 PM.
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#1879128 - 12/16/13 10:36 PM Re: IRS Backup Withholding Georgia Golfer
John Burnett Offline
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John Burnett
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Cape Cod
Yes.
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#1879256 - 12/17/13 03:13 PM Re: IRS Backup Withholding jwhiz
Elwood P. Dowd Offline
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Consider too whether you want to maintain the accounts...
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