Understanding your CP543 notice

What this notice is about

We sent this notice to tell you that you are required to begin backup withholding interest or dividend income for the payee (taxpayer) listed on your notice. The taxpayers listed on your notice owe money to the IRS. As a payer, you can withhold some of their income to pay off their balance.

What you need to do

• Start backup withholding at a rate of 24% for dividends, patronage dividends and interest payments you make to the taxpayers listed on your notice.
  • You must begin backup withholding within 30 days of your notice date.
  • Continue withholding until we notify you in writing to stop.
  • Failure to withhold can result in a tax liability and criminal or civil penalties.
• Report your withholding on Form 945, Annual Return of Withheld Federal Income Tax.
• Protect the payee's (taxpayer's) information or you could be subject to civil damages for unauthorized disclosure (Internal Revenue Code Section 7431).

You may want to

• Read about backup withholding.
• Review Publication 1335, Backup Withholding Questions and Answers PDF.
• View your payoff amount, payment history, or order transcripts using the Tax Account tool.
• Review Internal Revenue Code (IRC) sections relative to backup withholding.
  • IRC Sections 3403,6651,6656,7201,7202, and 7203.

Frequently asked questions

What is backup withholding?

Backup withholding is withholding on mostly interest and dividend income that the payers 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 payers continue backup withholding? (updated Feb. 19, 2025)

The payers should continue until we instruct them to stop or until the payee provides written certification from us that the payee is no longer subject to backup withholding.