IRS B-Notices for Contractors: What to Do Next
Received an IRS B-Notice about a contractor's TIN mismatch? Learn exactly what backup withholding is, when to start it, and how to fix the problem fast.
1What an IRS B-Notice Actually Means for Your Business
A B-Notice (officially IRS Notice CP2100 or CP2100A) arrives when the name and Taxpayer Identification Number (TIN) on a 1099 you filed don't match IRS records. It's not an audit, but it does create a legal obligation you must act on within a strict timeframe. Ignoring a B-Notice can expose your business to liability for backup withholding taxes you failed to collect — currently 24% of payments made to that contractor.
2First B-Notice vs. Second B-Notice: The Rules Are Different
The IRS distinguishes between a first and second B-Notice for the same payee within a three-year window, and the required response differs significantly. For a first B-Notice, you must send the contractor a copy of the notice and request a new, corrected W-9 within 15 business days of receiving it. For a second B-Notice covering the same payee, you cannot simply accept a self-certified W-9 — you must require the contractor to obtain a TIN validation letter directly from the Social Security Administration or IRS before you can stop withholding.
3When to Start Backup Withholding — and at What Rate
Once you receive a B-Notice, you have 30 business days to begin withholding 24% from payments to that contractor if they haven't provided a corrected TIN. You must deposit those withheld amounts with the IRS using the same schedule you follow for payroll tax deposits. Keep a clear paper trail of the notice date, the date you contacted the contractor, and any response you received — you'll need this documentation if the IRS questions your compliance later.
4How to Request a Corrected W-9 Without Losing the Contractor Relationship
Frame the W-9 correction request as a routine administrative step, not an accusation of wrongdoing. A simple message explaining that the IRS flagged a name-and-TIN mismatch and that you need an updated form to keep payments flowing smoothly is usually enough. Tools like W-9 Nudge let you send a tracked, electronic W-9 request with an automated reminder sequence, so you have a documented record of every outreach attempt — which matters if the contractor goes unresponsive and you need to demonstrate due diligence.
5Stopping Backup Withholding Once the Issue Is Resolved
You can stop withholding within 30 days after receiving a valid, corrected W-9 (for a first B-Notice) or an IRS/SSA TIN validation letter (for a second B-Notice). At year-end, you must report the total backup withholding on a 1099 filed for that contractor, with Box 4 reflecting the withheld amount. Failing to report withheld backup withholding correctly is itself a separate penalty exposure, so reconcile those amounts carefully before filing.
6Preventing B-Notices Before They Arrive
Most B-Notices stem from a contractor providing a nickname, maiden name, or informal business name instead of the exact legal name registered with the IRS. The most reliable prevention step is running TIN matching through the IRS e-Services portal before you file any 1099 — the free tool lets you verify up to 100,000 name-and-TIN combinations in bulk. Collecting a fresh, signed W-9 at the start of every new contractor engagement, rather than relying on a form from a prior year, also dramatically reduces mismatch risk.
7Record-Keeping Requirements After a B-Notice
Retain a copy of every B-Notice, your written outreach to the contractor, any W-9 or validation letter you received in response, and your withholding deposit records for at least four years from the due date of the related return. The IRS can assess backup withholding liability during an examination, and complete records are your primary defense. Storing these documents in a centralized, searchable system — rather than scattered across email threads — makes responding to any future inquiry far less stressful.
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Disclaimer: This post is for general informational purposes only. W‑9 Nudge does not provide tax, legal, or accounting advice. Consult a qualified professional for guidance specific to your situation.