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#135781 - 12/02/03 10:26 PM
Re: IRS Backup Withholding
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100 Club
Joined: Mar 2002
Posts: 199
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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
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Joined: Aug 2001
Posts: 21,939
Next to Harvey
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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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#135784 - 12/03/03 03:06 PM
Re: IRS Backup Withholding
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Joined: Oct 2000
Posts: 40,086
Cape Cod
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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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John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
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#135785 - 12/03/03 03:23 PM
Re: IRS Backup Withholding
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Joined: Aug 2001
Posts: 21,939
Next to Harvey
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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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In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.
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#135786 - 12/03/03 07:17 PM
Re: IRS Backup Withholding
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Platinum Poster
Joined: Jun 2003
Posts: 938
Do you know the way to ...
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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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Just a lowly 1st Year Law Student ("1L"), so don't take anything I say seriously!
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#135788 - 12/04/03 06:22 PM
Re: IRS Backup Withholding
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Joined: Oct 2000
Posts: 40,086
Cape Cod
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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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John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
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#135792 - 03/01/04 10:33 PM
Re: IRS Backup Withholding
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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
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Joined: Oct 2000
Posts: 40,086
Cape Cod
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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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John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
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#1877696 - 12/11/13 04:27 PM
Re: IRS Backup Withholding
Georgia Golfer
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New Poster
Joined: Mar 2010
Posts: 12
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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
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Joined: Oct 2000
Posts: 40,086
Cape Cod
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Yes.
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John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
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#1879256 - 12/17/13 03:13 PM
Re: IRS Backup Withholding
jwhiz
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Joined: Aug 2001
Posts: 21,939
Next to Harvey
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Consider too whether you want to maintain the accounts...
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In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.
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