Understanding your CP540 Notice

 

What this notice is about

This notice is sent to tell the taxpayer they may be subject to backup withholding if they don’t file their Form 1040, U.S. Individual Income Tax Return, reporting interest or dividend income and pay the amount of tax due.


What you need to do

  • File Form 1040 if you haven’t already filed.
  • Review your filed Form 1040 for underreported interest or dividend income.
  • File an amended Form 1040 for any underreported interest or dividend income.
  • Pay any taxes owed on Form 1040 with interest or dividend income.

You may want to


Frequently asked questions

What is backup withholding?
Backup withholding is withholding on mostly interest and dividend income that the payer will withhold when we instruct them to do so.    

What is the backup withholding rate?
The current rate is 24% and can increase or decrease with the tax laws. 

How long will the payer continue backup withholding?
The payer should continue until we instruct them to stop or until the payee provides written certification from us that they’re no longer subject to backup withholding.


Tips for next year

• File your tax return timely
• Report all interest and dividend income
• Pay all taxes due
 

¿Necesita ayuda?