5.19.3  Backup Withholding Program

All Official Use Only content has been replaced with ≡.  (11-03-2009)
Backup Withholding Program ("B" and " C" Programs) Overview

  1. There are two separate Backup Withholding (BWH) programs that require payers to withhold at the backup withholding rate from recipients’ (payees’) payment of Form 1099 income.

  2. The backup withholding rate is 28% for payments made after December 31, 2002. This new rate expires December 31, 2010.  (05-31-2006)
What Are the "B" and "C" BWH Programs?

  1. The "B" BWH program, (Regulation 31.3406 (d)-5(d)), provides notices to payers (a financial institution, business or person) who file information returns (see Forms 1099 below) with incorrect or missing Taxpayer Identification Numbers (TINs). The notices, CP2100 and CP2100A, advise payers that backup withholding could become necessary if payees (recipients of Forms 1099) fail to certify their TIN. The CP2100 and CP2100A Notices also list accounts with missing TIN's on which payers should have been backup withholding under section 3406(a)(1)(A). Payers with missing TIN accounts should not wait to receive a CP2100 or CP2100A to begin backup withholding. The "B" program includes Forms 1099-B, DIV, INT, MISC, OID, PATR information returns.

  2. The "C" BWH program (Regulation 31.3406 (c)–1) provides notices to payees (recipient of Forms 1099 below) who have underreported their interest or dividend income or failed to file a tax return reporting such income when required. These notices inform the payee what must be done to prevent BWH. The "C" program includes Forms 1099-DIV, INT, OID, and PATR information returns.

  3. Underreporter-related BWH requires payers to withhold at the backup withholding rate on Form 1099 payments to payees if the payee fails to correctly report these payments on an income tax return. If a payee fails to file a return (nonfiler) it is considered unreported income and may also be subject to the undereporter related BWH.  (07-31-2001)
"B" and "C" BWH Programs Research

  1. You will be responsible for providing the payee/payer with an explanation of BWH, the reason for the notice, and advising the payee/payer how to resolve the problem. When you receive a payee/payer contact (phone, walk-in, correspondence) you must first determine what BWH program the taxpayer is contacting you about.

  2. Research using IDRS command code TXMOD or CFOL command code IMFOL to determine what type of notice was received by the taxpayer. (See IRM Job Aid Part 5 Collecting Process (Payment Compliance) IRM 5.19.3 for a quick reference chart of BWH "C" Program notice actions.)

    1. The BWH notification statement appears as a "pop-up" paragraph on existing IRS notices (i.e. Balance Due, Underreporter, Return Delinquency and Exam notices) and forms if the taxpayer is potentially subject to BWH.

    2. You can identify "C" BWH cases on IDRS when a TC 140 is present on a return delinquency case, and either a TC 922 or TC 300 appears on balance due cases. A TC 924 with the amount of IRP income, the cycles of all BWH-related (AUR, Return delinquency, Exam, Balance Due or Unique BWH) notices, and a three-digit reference number will appear on both types of cases (see IRM 5.19.3). (See IRM Job Aid Part 5 for IRM 5.19.3 Collecting Process (Payment Compliance)), for TC 924 reference number breakdown and the meaning of each of the three position reference numbers.)

    3. A literal BWH indicator shows on CFOL CC IMFOL which reads the current Individual Master File (IMF) or IDRS CC screens. The literal shows the current IDRS BWH status and is updated periodically. However, IDRS status is not always current with the MF because of systemic delays. Check IMFOL for actual status. The literal displays the letters " BWI" followed by the number 0,1,2,4 or 8 (see IRM 2.3.11 TXMOD format).

  3. The BWH status codes and definitions are:

    • 0 — No BWH consideration.

    • 1 — Potentially liable (BWH notices will be issued).

    • 2 — Subject to BWH (payer is withholding on reportable payments).

    • 4 — Account satisfied (BWH condition satisfied when the account module becomes compliant when in potential status, or in any status when a manual stop is input).

    • 8 — BWH suspended (BWH actions suspended for a period of time).

  4. The following indicates the "B" Program (see Section 3.4):

    • First or second CP 2100 or CP 2100A and listing received by a payer.


    There is no indication on IDRS of BWH on the "B" program missing or incorrect TINs.

  5. The following indicates the "C" program (see Section 3.4.2):

    • CP 531, CP 538, CP 539, CP 540, CP 541 received by a payee

    • CP 543, 544 and 545 received by a payer

  6. Once you have determined which program is involved, refer to the appropriate sections of this IRM for additional information.

  7. Taxpayers with balances due or delinquent returns that are potentially subject to BWH under the "C" program must satisfy all outstanding BWH-related accounts to avoid imposition of BWH. Only account modules either in potential or subject BWH status must be compliant. Any other tax year modules that did not have underreporting of interest or dividend income do not have to be compliant.

  8. An extension of time to pay or an installment agreement does not stop BWH.

    1. If an installment agreement is granted, the taxpayer should be advised that BWH will continue until the account is paid in full.

    2. BWH may be imposed on the taxpayer prior to expiration of the agreement when the agreement period will exceed the time remaining in the BWH notice routine.

    3. An account reported as Currently Not Collectible (CNC) will not prevent BWH.  (05-31-2006)
BWH Technical Inquiries

  1. See IRS Publication 1281, "Backup Withholding for Missing and Incorrect TINs - Including Instructions for Magnetic Tape," for common questions/answers on the "B" notice program. If you cannot answer questions from payers about the " B" BWH notice incorrect/missing TIN program, refer callers to the IRP Centralized Call Site in Martinsburg, WV, TOLL FREE (866) 455–7438 or (304) 263-8700 (Not TOLL FREE).

  2. Campus employees may receive copies of taxpayer CP2100 or CP2100 A Notices attached to written correspondence. Provide an explanation to the taxpayer via IDRS letter 3667C,"Respond To CP2100/2100A Notice" .

  3. See IRM Job Aids Part 5 for IRM 5.19.3 Collecting Process (Payment Compliance) for common questions/answers on the " C" BWH notice program. The following questions from taxpayers/payees about the "C" underreporter/nonfiler program should be referred to the Examination function according to local procedures:

    1. Determinations of whether transactions meet the requirements under specific IR code sections.

    2. Issues relating to "forward contracts " or "regulated futures contracts"

    3. Issues involving foreign currency transactions

    4. Questions involving the determination of whether an alien is an "exempt foreign person"

    5. Determinations of whether income is considered foreign or U.S. source income.  (05-31-2006)
BWH Missing TINs

  1. A TIN may be a:

    • Social Security Number (SSN)

    • Employer Identification Number (EIN)

    • Adoption Identification Number (ATIN)

    • Individual Identification Number (ITIN)

  2. The IRS considers a TIN missing if it was not provided. Also, a missing TIN is one that was provided BUT is obviously incorrect. Backup withholding should already be imposed on missing TIN's.

  3. A TIN can ONLY have nine (9) numbers. It cannot have more or less than nine numbers nor can it have a combination of numbers and an alpha character within the nine-number sequence.


    Correct TIN: 801–45–6789


    Missing TIN: 901–45–678


    Missing TIN: 810–45–678Q  (01-01-2000)
Taxpayer Advocate Program Criteria

  1. Taxpayers meeting Taxpayer Advocate Service (TAS) criteria of the TAS will get priority handling.

  2. Refer to IRM 13.1.7 (Taxpayer Advocate Service Manual) for criteria qualifying for Taxpayer Advocate handling.

  3. If you are able to resolve and close the Taxpayer Advocate issue on the same day as the taxpayer contact, input history code item (1 day/CL) and do not refer the inquiry to the Taxpayer Advocate.  (05-08-2000)
"B" and "C" BWH Program Procedures

  1. The following subsections explain the " B" and "C" BWH program procedures.  (05-31-2006)
TIN-Related "B" BWH Notices (CP2100 and CP 2100A)

  1. The purpose of the CP 2100 and CP 2100A Notices is to tell payers that they may be responsible for BWH. The CP 2100 is issued as a paper notice or, formatted tape cartridge. The CP2100A Notice is only issued in a paper format. The notices are accompanied by a list(s) of missing and/or incorrect payee name/TIN combinations. Missing TIN's identified on notice/listing must have already imposed backup withholding status. The payer must not wait until a notice is received to impose backup withholding.

  2. The CP 2100 Notice is sent to " large" payers (those that have 250 or more missing and/or incorrect payee name/TIN combinations on the lists), in a tape cartridge format and the CP 2100A Notice is sent to "small" payers (those that have less than 50 missing and/or incorrect payee name/TIN combinations on the lists). "Mid-size" payers (those that have less than 250, but more than 50 missing and/or incorrect payee name/TIN combinations) receive paper CP2100 notices. Payers with less than 50 missing or incorrect name/TIN combinations, and at least 1 Form 1099-MISC with a dollar tolerance of $3,000.00 or more, will also receive the CP 2100A Notice.

  3. A payer who receives a CP 2100 or CP 2100A Notice should compare the list(s) to his or her business records.

    1. If a payee name/TIN combination on the list(s) DOES NOT AGREE with what is on the payer’s records, this could be the result of a recent update, a payer error in submission, or an IRS processing error.

    2. A payer should correct/update his or her records. THE PAYER DOES NOT HAVE TO DO ANYTHING ELSE. He or she is not required to write or call the campus (or the Information Reporting Program Call Site in Martinsburg, WV) to say that he or she made the correction/update.

    3. If a payee name/TIN combination on the list(s) AGREES with the payer’s records, he or she must determine whether this is the "first" or "second" time within three calendar years that he or she was notified by IRS that a name/TIN combination was incorrect (two notices received during the same year count as one notice). The actions a payer must take are different for the first and second notification.


    There is no indicator on IDRS when the payer is subject to BWH for TIN-related problems.  (05-08-2000)
"B" BWH First Notification

  1. A payer should send a First "B" Notice, a copy of Form W–9, Request for Taxpayer Identification Number and Certification (or an acceptable substitute), and an optional reply envelope to the payee within 15 business days from the date of the CP 2100 or CP 2100A Notice or the date they received it (whichever is later).


    An awaiting-TIN certification WILL NOT prevent or stop BWH when a payee gives a payer an incorrect name/TIN combination.

  2. A payer should include the return date on the First "B" Notice which is no later than 30 business days after the date of the CP 2100 or CP 2100A notice or the date they received it (whichever is later).

  3. A payer must clearly mark the outer envelope with "IMPORTANT TAX INFORMATION ENCLOSED" or "IMPORTANT TAX RETURN DOCUMENT ENCLOSED."

  4. A payer must begin BWH on payments made to payees who do not respond to the First "B" Notice by returning a signed W-9 by the return date specified on the "B" notice, which must provide a 30 business day time frame. The payer may begin BWH on payments to payees listed on the CP2100/CP2100A after notices are sent.

  5. A payer must stop BWH within 30 calendar days after receiving the Form W–9 from the payee.

  6. A payer should update his or her records with the corrected information received from the payee and include it on any future information returns (Forms 1099) he or she may file.


    A payer SHOULD NOT send the signed Form W–9 to the IRS.


    A payer SHOULD NOT file a correction (on Form 1099) unless he or she is making a change to the dollar amount reported.  (05-31-2006)
"B" BWH Second Notification

  1. A payer should send the Second " B" Notice and an optional reply envelope to the payee within 15 business days from the date of the CP 2100 or CP 2100A Notice or the date they received it (whichever is later).


    A payer SHOULD NOT send a Form W–9 with the Second "B" Notice.

  2. A payer must include the return date on the Second "B" Notice which is no later than 30 business days from the date of the CP 2100 or CP 2100A Notice or the date they received it (whichever is later).

  3. A payer must clearly mark the outer envelope with "IMPORTANT TAX INFORMATION ENCLOSED" or "IMPORTANT TAX RETURN DOCUMENT ENCLOSED"

  4. The payee must contact the Social Security Administration (SSA) to validate an SSN or the IRS to validate an EIN. This validation must be provided to the payer within 30 business days from the date of the Second "B" Notice to avoid BWH.

  5. If TIN is an SSN:

    1. The payee must request a Form SSA–7028, Notice to Third Party of Social Security Number Assignment, and be provided to the payer. Also, the payee must give a copy of the Second "B" Notice to SSA.

    2. When the payer receives the Form SSA–7028, he or she should update his or her business records and use the corrected information on any future information returns (Forms 1099) he or she may file.

  6. If the TIN is an EIN:

    1. The payee must write to the service center where he or she files his or her tax return, Attn: Entity Section, and ask for IRS letter 147C, "EIN Previously Assigned" . He or she must enclose a copy of the Second "B" Notice with the request.


      BWH regulations require that a payee request letter 147C in writing. Acceptable written requests may be received by IRS personnel via United States Postal Service or by fax.

    2. When the payer receives a copy of the 147C letter, he or she should update his or her business records and use the corrected information on any future information returns (Forms 1099) he or she may file.

  7. If a payer does not receive the required validation (SSA Form 7028 or IRS letter 147C) within 30 business days, he or she must begin BWH on payments made to the payee if he is not already withholding. The payer may begin BWH on payments to the payee during the 30 business day period.

  8. When the payer receives the required validation, he or she must stop BWH within 30 calendar days.  (05-31-2006)
Taxpayer Replies to CP 2100 or CP 2100A Notice

  1. Campus employees may receive correspondence from taxpayers who receive a CP 2100 or CP 2100A Notice and listing.

  2. Refer taxpayers to Publication 1281, "Backup Withholding for Missing and Incorrect Name/TIN(s) (Including instructions for reading tape cartridges)" , if necessary.

  3. For replies received without original documents, i.e., copy of payee Form W-9, classify waste the reply and send the taxpayer IDRS letter 3667C, "Respond to CP2100/2100A Notice." . This letter advises the payer that they are not required to send the information to the campus.

  4. For replies received with original documents, i.e., original CP 2100 or CP 2100A Notice, listing or original payee Form W-9, return the original documents to the taxpayer using IDRS Letter 2766C, "Notice CP2100/2100A Backup Withholding Explained" .  (05-31-2006)
"B" BWH Undeliverable Notification

  1. Research for a different address using IDRS. If a new address is found, mail the CP 2100 or CP 2100A Notice and listing to the new address of record.

  2. Do not change the original date on the undeliverable notice. Filers will have 15 business days from the date of receipt to complete all "B" notice mailings.

  3. If no other address is found, DO NOT file the undeliverable notice, listing, and original envelope. Classify Waste the undelivered notice, listing and original envelope.

  4. Annotate the IDRS ENMOD history with the action taken as follows:

    • CP 2100 (or 2100A) UDnewadd mm/dd/year or,

    • CP 2100 (or 2100A) UDnonewadd mm/dd/year.  (05-31-2006)
"B" BWH Recreated Notification Request

  1. Filers may contact the IRP Centralized Call Site to request recreated copies of CP2100 or CP2100A Notices. These requests may be received at any time after the initial mailing of each notice. If a call/request comes into the campus requesting a recreated notice, please refer that contact to the IRP Centralized Call Site. The request will be entered into the Notice Recreate System (NRS) at the IRP Centralized Call Site. The individual campuses will be responsible for all paper recreated notices and mail out of notices processed by the NRS. Each campus having recreated notices will receive a bi-weekly print tape. National Office will be responsible for older (TY-3 and TY-4) paper recreates not processed within the NRS System until such time as the NRS System inventory data is loaded inclusive thru TY-4. The IRP Centralized Call Site is responsible for all tape recreated notices.

  2. For campus paper notices: Bi-weekly

    1. When an individual campus has at least one recreated notice, an E-mail will be automatically generated by the system to the Management Support Branch Analyst responsible for BWH Program. The IRP Centralized Call Site analyst will be the sender of the E-mail message to the respective campus location.

    2. Campus locations are required to print, manually stuff, and mail all recreated notice requests received for paper listings of missing and/or incorrect TINs throughout the calendar year as they are received. Each Management Support Branch analyst must respond to the automatic E-mail confirming the mail out of the recreated notices. The recreated notice must be sent to the customer within 7-10 business days of the automated E-mail date.

  3. For tape notices: Bi-weekly

    1. The IRP Centralized Call Site will fill all requests received for tape listings of missing and/or incorrect TINs within the four year retention period (i.e., 4 years from original CP2100/CP2100A Notice Date).

    2. Request for tape recreates received by individual campuses must be routed through the Management Support Branch Analyst to the IRP Centralized Call Site.  (05-31-2006)
e-Services Taxpayer Identification Number (TIN) Matching Program

  1. Payers who receive a CP 2100 or CP 2100A Notice may be assessed penalties for providing incorrect or incomplete TINs when filing their annual Information Returns.

  2. Prior to filing annual Information Returns with the IRS, payers of income subject to backup withholding under IRC 3406 (b) may be eligible to research their payees' Form W-9 information through the TIN Matching program.

  3. Payers of income reported on Forms 1099 B, DIV, INT, MISC, OID and PATR, are eligible if they have filed these Information Returns with the IRS in one of the two past tax years and, are listed in the Payer Authorization File (PAF).

  4. The Payer Authorization File contains tax filing records on all payers filing Information Returns.

  5. If the campus receives taxpayer inquiries regarding the TIN Matching program, employees should refer callers to the program e-mail address at, TIN.Matching@irs.gov.  (11-03-2009)
Underreporter/Nonfiler "C" BWH Notices

  1. Taxpayers who have under reported their interest or dividend income or failed to file a tax return reporting such income when required, identified for BWH by:

    • Examination during routine audit processing

    • Return delinquency checks which identify taxpayers who receive interest or dividend income, but fail to file a return

    • CP 2000 Underreporter Program (URP)  (05-08-2000)
Reportable Payments Subject to "C" BWH

  1. Payments are generally considered made when they are credited to the taxpayer’s account.

  2. Reportable payments subject to the " C" program are:

    • Interest Income — reported on Form 1099–INT, Statement for Recipients of Interest Income

    • Dividend Income — reported on Form 1099–DIV, Statement for Recipients of Dividend Distributions

    • Patronage Dividends — reported on Form 1099–PATR, Statement for Recipients of Taxable Distributions Received from Cooperatives

    • Original Issue Discount — reported on Form 1099–OlD, Statement for Recipients of Original Issue Discount

  3. Interest payments between individuals are exempt from reporting, and therefore, BWH.  (11-03-2009)
"C" BWH Supplemental Notices

  1. The (CP 531) "C" BWH notice and other separate (CP 538 /539/540/541/542/543/544/545) "C " BWH notices include a notification statement, but do not include account or balance due information. Only Balance Due, AUR, and Exam notices with a BWH paragraph explaining the underreported or missing interest/dividend income, will show the balance due information if previously assessed. The Return Delinquency notices (CP 516 and 518) will only contain a "pop-up" BWH paragraph explaining the need to file the tax return(s) to report interest/dividend income.

  2. The taxpayer will have received at least four notices, from Return Delinquency, Balance Due, AUR or Exam and two BWH notification notices, with respect to underreporting, over a period of at least 210 days, and must resolve the problem causing "C" BWH within this period in order to avoid imposition of BWH due to underreporting. A taxpayer who does not resolve the problem is issued a final "C" BWH Notice (CP 539/541) with notification that BWH is now in effect. This final (fifth) notice is generated by the "C" BWH system. It does not contain balance due information, nor does it affect the regular IDRS notice routine.

  3. Simultaneously with the final notification to the taxpayer, payers are sent a "C" BWH Notice (CP 543) advising them to begin backup withholding within 30 business days on all reportable payments made to the taxpayer. No further action needs to be taken on taxpayers no longer on the payor's files. Publication 1335 information in this area.

  4. A listing of the supplemental " C" BWH notices can be found in Document 6209, Section 9, IDRS Notices and Notice Codes. Also listed in Document 6209 is CP 546, Special Backup Withholding Listing. CP 546 is generated when a financial institution requests a listing of all taxpayers under their EIN that should be on BWH. This generally happens when one financial institution takes over another.  (11-03-2009)
"C" BWH Status Indicators and Module Conditions

  1. The list below provides the module conditions that cause a taxpayer to become potentially liable for "C" BWH or subject to BWH. This list also provides the literal BWH status indicators that will appear on CFOL or IDRS displays and notices for each condition.

    1. The literal indicator BWI–1 will be displayed when either a TC 300 with a Reference Number 890 exists in the module or a TC 140 or a TC 922 with an income field meeting the criteria in See IRM

    2. The literal BWI–2 will be displayed after a minimum of four notices have been issued to the taxpayer over a period of at least 210 days that indicate the underreporting condition has not been satisfied or suspended. A final BWH "Start" notice will now be sent to begin BWH.

    3. The literal BWI–4 will be displayed when the taxpayer resolves the BWH condition prior to receipt of a final notice (in potential status) or if BWH was previously imposed and a manual stop is input (when the BWH condition is resolved and is removed by the annual MCC cleanup analysis after October 15th, the BWI indicator will be blank).

  2. The conditions below indicate that BWH has been satisfied and the module will be removed from BWH during MCC annual analysis if the BWH indicator is in subject status (BWI-2), the BWH status indicator will change to a blank. If the module was in potential status, (BWI-1), the BWH indicator will change to a (BWI-4).

    1. Collection Statute Expiration Date (CSED) has expired (normally 10 years) IRM

    2. Module goes into Status 12 for a reason other than the posting of a tax return (e.g., full payment, abatement, etc.).

    3. Full paid return posts causing the module to go into a Status 10 or 12 and the interest/dividend income is equal to or greater than the IRP data.

    4. TC 590, 591, or 596 posts.

    5. Unreversed TC 540 for a deceased taxpayer posts.

    6. TC 922 with appropriate process codes posts.

    7. Manual stop (Action Codes 1,2,3, or 7) posts from the input of a TC 971 AC 190, refer to IRM 5.19.., TC 190 AC 190 Input Action for Entry on the "C" BWH File - CSCO KCSC and PSC only.

    8. TC 290 for zero posts to a module containing a dummy TC 150.

  3. The literal BWI–8 will be displayed when further action must be taken before a final decision on BWH can be made. A posting of one of the transactions below will suspend further " C" BWH actions until the account problem is resolved. This status will only occur if the taxpayer was previously in a potential "C " BWH status (BWI = 1). These transactions will have no effect on the case where the taxpayer has already been made subject to "C " BWH (BWI = 2).

    1. Unreversed or unexpired TC 460 posts.

    2. TC 520 (cc 81 or 85–89) is present in any module.

    3. TC 594, 599 (unless input as a substitute for return code), or 610 is present.

    4. Unreversed TC 910, 914, 916, or 918 posts.

    5. Unreversed TC 470 posts.

    6. Return posts, the module goes into Status 12, and the interest/dividend income is less than the IRP data.

    7. Return posts (other than a substitute for return), causing the module to go into a Status 21 and the interest/dividend income is zero.

    8. Dummy TC 150 posts.

    9. Unreversed TC 494 posts.  (11-03-2009)
Processing "C" BWH Notices Responses

  1. If there is more than one module in subject status (BWI-2) and only one module is resolved during response processing, the BWI indicator will not update from current subject status.


    Modules in "C" BWH subject status may drop off IDRS. This means you must check each tax year beginning with the current tax year (TY) through the past six years shown on IDRS using CC IMFOL. Check those modules for BWH subject status before requesting a manual stop. Once the CSED expires on a module, Master File will update BWH as satisfied.

  2. Allowing an Installment Agreement (IA) or Currently Not Collectible (CNC) does not affect "C" BWH consideration.

    1. The tax, penalty, and interest must be full paid for all subject status tax modules before the taxpayer can be released from "C" BWH.

    2. When an IA or CNC has been granted, advise the taxpayer that BWH will continue, using Letter 681C, 1962C, or 2273C, with the appropriate selective paragraphs.

  3. No action is required by the payor when the payee on notices 543, Publication 1335 or 544 or 545 cannot be located. Place correspondence in Classified Waste or contact payer if requested.

  4. Disaster - O freeze. Modules with an O freeze will automatically not be subject to BWH. Disaster -S freeze. Filing and payment requirements on current year returns will be extended until the freeze is removed. Affected taxpayers located outside the covered disaster areas should be advised to call the toll free number, 866-562-5227, to self identify for disaster relief. BWH is continued where a balance due has been assessed or the return is in TDI status. See IRM and IRM information on -O and -S freeze conditions.

  5. Combat Zone -C freeze. BWH is suspended until six months after the payee leaves the designated combat zone. Payers will be notified to stop BWH. BWH resumes after the six month period. Follow IRM if module is not in suspense status.  (11-03-2009)
"C" BWH Undeliverable Processing

  1. If any "C" BWH Notice is returned as undeliverable and there is a yellow label which shows a forwarding address from the U.S. Postal Service (USPS), then compare the yellow label entity to the name on the Undelivered Mail and CC ENMODE or IMFOLE to verify that it is the same taxpayer. For example, if the yellow label shows John S. Smith ENMOD/IMFOLE shows John Smith, then conclude that it is the same taxpayer. Then update the forwarding address from the yellow label using CC ENREQ with the appropriate location code. Rev. Proc. 2001-18 Section 4.06 allows the Service to change the address when the taxpayer notifies the USPS facility. After updating the new address on ENREQ, destroy the notice. If you determine that information on the yellow label shows a name change or you are not sure that it is the same taxpayer, or does not contain a better address, then follow the procedures below:

    1. CP 539 and CP 541 - , See IRM, TC 971 AC 190 Input Action for Entry on the "C" BWH File - CSCO KCSC and PSC use only. If the subject status has changed or a stop was requested, destroy the notice.


      Research using INOLE on "single" entities will often show joint filing. For example, if the CP 539 or 541 is for the spouse on a jointly filed account, the TC 971 will be input on the joint module.

    2. CP 543 - See IRM , TC 190 Input Action for Entry on the "C" BWH File - CSCO KCSC and PSC use only.

    3. CPs 531, 538, 540, 542, 543, 544, 545 - Destroy UD mail after extracting any useful information (i.e., TC 190 input, a note that taxpayer is deceased, etc...) for input to IDRS.

  2. If the undelivered item has a note that the taxpayer is deceased, input TC 540 for the year the taxpayer died, if known, otherwise, use the current year. This will stop" C" BWH systemically if the taxpayer is in potential status. If the taxpayer is in subject status, input a TC 971 AC190 with the appropriate secondary action code for the manual stop, See IRM  (11-03-2009)
IDRS Actions for "C" BWH Notices

  1. When the taxpayer responds to a notice status account and indicates BWH will be resolved, initiate action to prevent the issuance of subsequent IDRS notices.

    1. Input CC STAUP for balance due accounts where you determine the next notice will be issued prior to completion of the action. Allow sufficient time (six – eight weeks) for the action to process. The next notice should be specified as the subsequent IDRS status. The input of a STAUP will not stop unique BWH notices, only Balance Due notices.

    2. Be sure to input CC STAUP on all BWH-related accounts, including those below deferral level. CC STAUP will not effect an account already subject to BWH (BWI = 2). No input is required for CP 2000 notices or Examination adjustment forms.

  2. Input transaction codes that will satisfy the "C" BWH condition.

    1. Input a TC 590 with appropriate cc if the taxpayer verifies he or she is not required to file a return, seeIRM, IMF - Determining Liability.

    2. Input a TC 540 and 591 if the taxpayer with the income was deceased in the year in question, and the surviving spouse filed a joint return, reporting all income.

    3. Input a TC 291 if the taxpayer can provide sufficient information for an adjustment within tolerance amounts. For example: A taxpayer is assessed additional tax because of no response to a CP 2000 for under reporting interest/dividends.

    If You should Then
    The taxpayer calls providing information on how the income was reported Review and verify (use CC RTVUE) that the amount was reported Use REQ54/ADJ54 to input the TC 291 to correct the amount of additional assessed tax.
    The taxpayer states the unreported amounts were actually reported under another TIN, such as a spouse, child or parent Review the other account using CC RTVUE to verify the amounts were reported Input TC 291 using CC REQ54/ADJ54 if the taxpayer provides sufficient information.
    Note: Most under reporter issues require written documentation. Reference IRM 4.19.3.
    The taxpayer questions income listed on IRS records Research IRP data via CC SUPOL or IRPTR, which provides names of payers of wages, interest, dividends, and other income Depending on research results, take the appropriate action. Refer to CSCO or AUR for rework or take action to reverse assessments.  (11-03-2009)
BWH "C" Program Annual Analysis

  1. Once "C" BWH is imposed, it normally will remain in effect until January 1 of the following year if the condition causing "C" BWH is not resolved by October 15, Martinsburg Computing Center will analyze for satisfied modules after October 15th of each year. Any taxpayer subject to "C" BWH who has not resolved the condition by October 15th will continue under " C" BWH the following year.  (11-03-2009)
Requests to Stop Underreporter "C" BWH

  1. If the taxpayer is in potential status and meets one of the four conditions below, BWH analysis will suspend or satisfy the current status automatically during MCC analysis based upon normal processing.

    1. No underreporting existed (e.g., abatement of the CP 2000 assessment or taxpayer is not liable (TC 590/591).

    2. The underreporting condition has been corrected, including full payment of all tax, penalty, and interest due.

    3. The taxpayer disputes that any underreporting has occurred (Examination Referral Criteria).

    4. BWH will, or is, causing a hardship (as defined in IRM 13.1.7 Taxpayer Advocate Program Manual) and it appears unlikely that the taxpayer will not underreport again. Prepare Form 911 and refer to the Taxpayer Advocate.

  2. Taxpayers in potential status or subject status may request BWH not be started or discontinued if one or more of the above conditions exist in (1)a, b, c, or d (follow procedures in IRM ,"C" BWH Procedures).

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .  (11-03-2009)
"C" BWH Satisfying Transactions

  1. When a taxpayer is in potential " C" BWH status (BWH–1) and you have determined one of the following satisfying transactions has posted, do not input a TC 971 AC 190 (unless 4 notices have already been issued. Then you must input a TC 971 AC 190 with the appropriate secondary action code for the manual stop, see IRM, TC 971 AC 190 Input Action for Entry on the" C" BWH File - CSCO KCSC and PSC use only.

    1. A full paid tax return, TC 150, posted to a return delinquency module (except a dummy TC 150) and the interest and dividend income reported on the return is equal to, or greater than, the Information Return Program (IRP) data (the module status will be 12).

    2. A balance due module satisfied by full payment, abatement, or credit transfer (Status 12).

    3. An unreversed TC 590, 591, 596 (unless input closing is a Substitute for Return (SFR) case).

    4. An indication that the taxpayer is deceased (TC 540).

    5. Expiration of Collection Statute Expiration date (CSED).

    6. TC 922 with process codes 82, 87, and 90 for TY 198612 and Prior, and 73, 75, 77, 78, 93, 95, and 96 for TY 198612 through TY 198812. For TY 198812 and subsequent periods, the codes are 69, 70, 71, 73, 74, 89, 91, and 93.

    7. A dummy TC 150 in a TDI module suspends " C" BWH processing and a posted TC 290 for zero in the same module satisfies "C" BWH.

  2. The following are satisfying transactions for taxpayers in potential or subject status (BWI–1/BWI–2):

    1. A manual stop has posted.

    2. A TC 590 or 591 posts and updates the status to 06.

    3. A TC 291 or 301 posts and updates the Status 12.

    4. A TC 594 cc 84 posts which indicates that the taxpayer filed jointly with the spouse under the spouse's SSN

    5. A TC 540 posts to the year of death. This will satisfy BWH for all modules for the deceased taxpayer (not just the module for the year of death).  (01-01-2000)
"C" BWH Suspending Transactions

  1. The following are suspending transactions for taxpayers in potential "C" BWH status (BWI–1):

    1. TC 594, 599 (unless input on a SFR case), a TC 610, or an unreversed/unexpired TC 460 (Status 04) posts to a return delinquency module.

    2. An unreversed TC 910 or 918 posts to the entity.

    3. An unreversed TC 914 or 916 posts to the module.

    4. A 47 Status hold (unreversed TC 470) on a balance due module.

    5. An unreversed TC 520 with a Closing Code 81, 85, 86, 87, 88, or 94 in any module.

    6. An Other Than Full Paid (OTFP) tax return (TC 150) and the return reflects no interest or dividend income.

    7. An unreversed TC 494 posted indicating a statutory notice is in process which suspends BWH.  (11-03-2009)
"C" BWH Procedures

  1. When a taxpayer is in a potential " C" BWH status (BWI–1) and you have determined no underreporting exists or has been corrected (e.g., abatement or TC 59X), check for CC TXMOD/IMFOLto verify the program has, during MCC analysis, automatically stopped BWH. If not, take the following actions:

    1. Verify the input of a manual stop. The " C" BWH indicator will show a satisfied status (BWI–4) and freeze the notice counter at the last notice issued (BWNC 1, 2, 3, 4). You can further verify the stop by referring to the TC 924 in the IDRS TXMOD display. If you verify that a manual stop was input, no further action is required.

    2. If a manual stop has not been input, See IRM , TC 971 AC 190 Input Action for Entry on the "C" BWH File - CSCO KCSC and PSC use only, and request the manual stop to suspend further "C" BWH actions and notices. You can request a manual stop if a satisfactory response is received from the taxpayer within six weeks after the issuance date of the CPs 538/540.


      Critical notice responses will require input action before the weekend update to prevent issuance of subsequent notices.

  2. Master File analysis pre-BWH processing begins during the following cycles (YYYY52, 04, 08, 13, 17, 21, 26, 30, 34, 39, 43, 47, and 52) will be the cycle numbers generated on all unique " C" BWH notices to payees. Transaction code 924 on CC TXMOD will show the cycle dates of the BWH notices.

  3. If the taxpayer is in "C" BWH subject status (BWI–2), he or she will normally remain subject to "C" BWH until the following January 1 if the condition causing BWH is resolved.

  4. Prepare Form 4442, Inquiry Referral, and list the detailed information provided by the taxpayer to indicate no underreporting exists or has been corrected. Forward the Form 4442 to Collection Branch at Kansas City - KCSC (W&I) or Philadelphia PSC (SBSE) campuses depending on the BOD Code, refer to IRM for the KSCS or PSC addresses. Include research prints, as appropriate. Advise the taxpayer the response will be reviewed and he or she will be advised of the decision. KCSC and PSC are the only campuses authorized to make changes to the BWI. The TC 971 AC 190 with appropriate secondary action code may or may not be input depending upon the results of the Inquiry Referral Form 4442.  (11-03-2009)
TC 971 AC 190 Action on the "C" BWH File - CSCO KCSC and PSC use only

  1. The Command Code REQ/FRM77 with transaction code (TC) 971/972 AC 190 has replaced the manual paper process using form 8408. The TC 971 AC 190 will cause changes to the BWH status codes (just like the paper process from Form 8408 did). TC 971/972 AC 190 will be used to stop BWH, or restart BWH, or indicate that an undeliverable notice was returned. When actions are completed, documentation as to the actions taken and reasons for them need tom be input on Desktop Integration (DI).


    Use a TC 972 AC 190 to reverse a previous TC 191 AC 190 only if the TC 191 AC190 was input in error. The TC 972 AC 190 must be input within the same week of the incorrect TC 971 AC190 to allow the reversal. If the TC 972 is not input within the same week, you must input a new TC 971 AC190 as appropriate.

  2. The TC 971 AC 190 must contain a secondary action code (1,2,3,4,5,6 and 7) to be input in the MISC-Field of CC FRM/REQ77. The secondary action code will indicate the type of change to the BWH status code as defined by 3 below. In the MISC-FIELD, The first space will contain secondary action codes 1 - 7. For secondary action codes 2,3, and 6, the XREF-TIN field will always contain the Spouses' SSN for codes 2 or 3 or the payer (TIN or SSN) for code 6. For secondary code 6 only. the second space in the MISC-FIELD will always contain the Payer Code either E (for BMF - EIN number) or S (for IMF - SSN number.

  3. Definitions of the secondary Action Codes to be used in CC REQ/FRM MISC-FIELD are as follows:

    • 1 = Stop BWH on Primary Social Security Number (SSN).

    • 2 = Stop BWH on Secondary SSN. In addition, the secondary SSN must be entered on the XREF-TIN field.

    • 3 = Stop BWH on both SSNs. In addition, the secondary SSN must be entered on the XREF-TIN field.

    • 4 = Restart BWH on primary SSN

    • 5 = Undeliverable taxpayer notice ( only on 539 or 541)

    • 6 = Undeliverable payer notice (only on CP 543). The Payer " E" code for BMF and "S" code for IMF will be entered on the MISC-FIELD next to Action Code 6. The Payer' TIN (EIN or SSN) will be entered on the XREF-TIN field.


      The Payer Notice may have more than one payee ( taxpayer) listed. If so, you must input a separate CC REQ/FRM77 for each payee ( taxpayer) listed on the notice.

    • 7 = Stop BWH on primary SSN (potential status).


    If the input of the TC 971 AC 190 shows no BWH activity, an IDRS error message will display No Backup Withholding on Module.

  4. After the TC 971 AC190 with the appropriate secondary action code shown in paragraph 3 is entered using CC REQ/FRM77, a TC 924 with a 3 digit reference number (refer to TC 924 definitions in paragraph 5 below) will post indicating a BWI change. Secondary action code 4 (restart) and 7 (stop in potential status) goes through the next monthly analysis and takes up to six weeks to post a change to the BWI indicator. All other action codes bypass the BWH monthly analysis to expedite changing/updating the BWI indicator and will post within six weeks.


    If there is an unpostable condition for the TC 971 AC190, the TC 924 will not post to IDRS. You must check the unpostable condition, and if the BWH still needs to be updated, input a new TC 971 AC 190 with the appropriate secondary action code.

  5. When the TC 971 AC 190 posts on IDRS, the tax module will display a posted TC 924 with the appropriate 3 digit reference number showing the change to the BWH status. The TC 924 will post on IDRS as follows:

    • TC 924 reference number 140 will post if the module contains a TC 971 AC190 with a secondary action code of 1, 2, or 3. This will change the Backup Withholding Indicator (BWI) fro 2 to 4 indicating "Account Satisfied " .

    • TC 924 refernce number 160 will post if the module contains a TC 971 AC 190 with a secondary action code of 4. This will re-start BWH on a primary SSN.

    • TC 924 reference number 190 will post if the module contains a TC 971 AC 190 with a secondary action code of 7. This will change the BWI from 1 to 0 indicating No BWH Consideration.


      TC 971 AC 190 with secondary action codes 5 and 6 will not have a TC 924 transaction code.  (11-03-2009)
BWH Error List from TC 971 AC 190 Inputs (CSCO KCSC and PSC use only)

  1. Normally, an unpostable condition will be identified at the time the TC 971 AC 190 is trying to post. However, there may be other error conditions identified through BWH analysis An Error List (Report # 406-61) will be produced and provided to KCSC or PSC for analysis Review each item on the error list if the taxpayer's account needs correction. If so, input a corrected TC 190 with appropriate secondary action code. The following action codes appear on the error list:

    1. Code "A" reserved.

    2. Code" B" identifies multiple manual transactions being processed during the same extract period which are inconsistent for the same IMF module.

    3. Code" B" also identifies inconsistencies when Action Codes 1 and 3, 2 and 3, stop or restart, or a stop code and restart code 4 may cause an inconsistency. The BWH system will accept the action code for the most recently requested transaction and error out the other transaction.

    4. Code "C" identifies the payee is not in subject status..

    5. Code" D" identifies manual transactions which failed to match the name control SSN of the IMF module.

    6. Code "E" identifies manual transactions which have failed to match the tax period of the IMF module or the tax module is not in subject status.

    7. Code" F" identifies manual transactions which have failed to match the secondary SSN in the XREF-TIN field of REQ77 of the IMF module for the required tax year.

    8. Code" G" identifies manual transactions which are inconsistent with the current IMF module Action Codes 1, 2, 3, or 7 when the taxpayer was never considered for BWH or has satisfied BWH.

    9. Code" G" also identifies manual transactions which are inconsistent with the current tax module Action Code 4, when the taxpayer has never been considered for BWH or is not in satisfied status due to a prior manual stop.

    10. Code "G" also identifies manual transactions which are inconsistent with the current tax module Action Code 5, when the taxpayer is not in BWH subject status.

    11. Code "H" identifies Action Codes 1, 2, or 3 requested for some but not all tax years in BWH subject status.

    12. Code" H" identifies a stop was issued in error because taxpayer has not resolved all tax years. Issue 1978C Letter with appropriate selective paragraphs.

    13. Code "Q" identifies a secondary a secondary action code that is not 1, 2, 3, 4, 5, 6, or 7.

    14. Code" R" identifies a secondary action code 6 and omitted the TIN-Type E or S in the MISC-FIELD or did not include the Payer's EIN/SSN in the XREF-TIN field.

    15. Code S identifies a secondary action code 1 or 4 input and a secondary SSN entered in the XREF-TIN field in error.

    16. Code" T" identifies a secondary action code 2 or 3 was input and omitted the secondary SSN in the XREF-TIN field.

    17. Code" U" identifies a secondary action code 5 or 7 was input and contained an error in the secondary SSN in the XREF-TIN field.

    18. Code" V" identifies a TC 972 with a secondary action code 4 or 7 with no matching secondary action code of the prior TC 971.

  2. Count each item on the register for reporting purposes.  (11-03-2009)
Further Considerations When in "C" BWH Subject Status

  1. If the taxpayer states that information we previously requested was provided to the campus but has not been acted upon, the taxpayer may qualify for Taxpayer Advocate priority handling See IRM

  2. In certain unusual situations, a taxpayer may demand immediate release of "C" BWH, based on the fact it was inappropriately imposed due to IRS error.

    1. Research the account to ensure there is no other module for which the taxpayer is subject to "C" BWH (review CC IMFOL, as well as SUMRY, TXMOD, etc.).

    2. If the taxpayer is unwilling to wait for the normal release to take effect (six – eight weeks) and has satisfactory evidence (e.g., copy of returned/canceled check showing a payment was made to full pay the module before the BWH Start Notice was issued), or your research shows an IRS error, issue Letter 2027C (quick release) to the financial institution(s) currently taking BWH from dividend and interest payments. The letter authorizes the financial institutions to stop withholding within 30 days.

    3. Rev. Proc. 31 3406 (c) -1 (e) (2) (i) (A) requires a 30-day "Quick Release " under the above circumstances. Payer is authorized to stop even sooner ("At Any Time" ). The same rule applies to cases of undue hardship.

    4. Statute requires the IRS to provide a notice to stop BWH within 45 days. See. IRC Section 3406(c)(3)(C)(ii)

  3. When disputes arise, the taxpayer must provide documentation for claims of hardship in writing as verbal telephone contact is insufficient.

  4. Review and verify the request or claim for determination. (See (2) a above)

    1. If you make a favorable determination, the payee will not be subject to underreporter "C" BWH with respect to only that specific year.

    2. If the taxpayer/payee is not subject to " C" BWH for this or any other year, send Letter 1979C to the taxpayer/payee. Follow procedures for the issuance of a manual Stop refer to See IRM TC 971 AC190 Input Action on the" C" BWH File - CSCO KCSC and PSC only to generate a notice to the payer to stop BWH.

    3. If you determine the taxpayer is subject to "C" BWH, deny the request and send Letter 1978C.

  5. Where the taxpayer states the Service has agreed to stop "C" BWH, but indicates all or some payers did not receive the proper notification:

    1. Research IDRS to verify whether the taxpayer is subject to "C" BWH. If not subject to " C" BWH, advise the taxpayer to give a copy of Letter 1979C to the payer(s).

    2. If the taxpayer does not have a copy of the letter, secure from the taxpayer their payer(s) name, address, account number, etc., and issue Letter 2027C to the payer(s).  (11-03-2009)
Request for List of Payees Subject to "C" BWH

  1. When a financial institution is taken over by another, the records of the predecessor are not always available. On these occasions, the current institution will request a listing of all payees subject to BWH under their Taxpayer Identification Numbers (TINs).

  2. Ensure the closed financial institution is not an open entity. Use IDRS CC ENMOD or CFOL CC BMFOL to verify filing requirements have been closed out and the new company has been established.

  3. To request a current listing of customers subject to BWH, you must secure the following information and forward a C4442 with it to the Lead BWH Tax Examiner, PSC, 11601 Roosevelt Blvd., Philidelphia, PA 19155, South Building 657-S.

    1. Name, address and TIN of the requesting financial institution or individual;

    2. Telephone number and name of the person making the request or the name of a company representative;

    3. Name, address and TIN of the closed financial institution;

  4. Include your name, telephone number, and branch location with the request.

  5. The Lead TE at PSC will track the request and transmit via sure e-mail to MITS. The e-mail address is &MITS ACIOAD-CP-Backup Withholding Project.

  6. When requests are processed, MITs will forward a tape to the Centralized Print Sites (CPS) requesting issuance of the CP 546. The listing will be printed on CP 546. MITs will notify both the lead at PSC and the SBSE analyst that the task has been completed.

  7. Remind all requesters that the payee’s identity and account listed in the notice is only for their use in complying with BWH regulations; unauthorized disclosures may subject them to civil damages under IR Code (26 USC 7431).

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