Rev. Proc. 2014-43 - Revised procedures for IRS “B notice” program 

July 17:  The IRS today released an advance copy of Rev. Proc. 2014-43 that provides revised procedures for individual payees required to obtain a validation of their social security number (SSN) to prevent or stop backup withholding under section 3406 following the receipt of a second backup withholding notice from a payor within a three-year period.

Rev. Proc. 2014-43 [PDF 14 KB] provides new procedures under the “B notice” program of the IRS.

Background

Section 3406(a) controls when a payor must backup withhold on reportable payments it makes to a payee, including when the IRS notifies a payor that the taxpayer identification number (TIN) furnished by the payee to the payor is incorrect—i.e., for individual persons, a TIN is generally an SSN.


A payor—like a bank or broker—must send a notice to a payee after being notified by the IRS that the payee provided an incorrect name and TIN combination with respect to an account (known as a “B notice”).


The B notice informs the payee that the name/TIN combination furnished to the payor does not match IRS or Social Security Administration records and describes the steps the payee must take to stop or prevent backup withholding from payments made after receipt of the B notice.


A payor that receives a notification from the IRS of a name/TIN mismatch for an account must send the payee a B notice.


  • If this is the only notification of a name/TIN mismatch received by the payor with respect to the account during the past three years, the B notice (referred to as a “first B notice”) must instruct the payee to provide a signed Form W-9, Request for Taxpayer Identification Number and Certification, to the payor to stop or prevent backup withholding.
  • If the payor receives a second notification from the IRS of a name/TIN mismatch with respect to an account, and this notification is received within three years from the date of a previous notification of a name/TIN mismatch with respect to that account, the payor must send the payee another B notice (a “second B notice”).

A TIN certified on a Form W-9 is not sufficient to stop or prevent backup withholding after a second B notice. Instead, the payor must receive validation of the payee’s name and TIN combination from the Social Security Administration or the IRS to stop or prevent backup withholding.

Reasons for change

Pursuant to IRS Announcement 2010-41, an individual payee has been able to obtain validation of the payee’s name and SSN by contacting the local Social Security Administration office and requesting a social security number printout. However, beginning August 1, 2014, the Social Security Administration will discontinue providing SSN printouts.

Rev. Proc. 2014-43

Today’s revenue procedure sets forth revised procedures for an individual payee to obtain validation of the payee’s name and SSN from the Social Security Administration on or after August 1, 2014.


Under these revised procedures, following receipt of a second B notice, a copy of a social security card will be deemed as validation from the Social Security Administration of a name and SSN combination.


The revised procedures under Rev. Proc. 2014-43 provide:


  • A second B notice will be satisfied if an individual payee provides the payor with a copy of a social security card with his or her correct name and SSN.
  • Payors may rely upon a social security card as being correct only if the name and SSN combination appearing on the card differ from the name and SSN combination appearing on the second B notice, or if there is a date appearing on the social security card that is no earlier than six months before the date of the second B notice.
  • If a payee does not have a social security card, the payee must obtain a new or replacement social security card from the Social Security Administration.
  • If the payee’s name and SSN combination listed on the second B notice is not current or correct, the payee must update his or her records with the Social Security Administration and provide a copy of the updated social security card to the payor.
  • A payor who receives a copy of a payee’s social security card meeting the requirements specified in today’s revenue procedure will not be required to commence backup withholding and may stop backup withholding on reportable payments made to that payee.
  • The payor must use the name and SSN combination provided pursuant to this revenue procedure on future information returns and statements if the payor is subject to future information reporting with respect to the account.



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