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B-Notices and TIN Validation: The Bank's Backup Withholding Cycle

9/8/2026

Every fall, a stack of IRS correspondence lands in deposit operations that nobody is quite sure who owns. It is a CP2100 or CP2100A notice: a list of accounts where the name and taxpayer identification number the bank reported on a Form 1099 did not match IRS records. That notice starts a sequence with fixed business-day deadlines, two different customer letters, a second-notice validation rule that most frontline staff have never heard of, and, if the customer does not respond, backup withholding on their interest.

The B-notice cycle is small in volume at most banks and large in consequences. Done right, it fixes bad TINs before they generate penalties. Done wrong, it produces withholding on customers who did nothing wrong, missed withholding on customers who should have been withheld on, and penalty notices that the bank cannot answer because it cannot show its solicitations.

This guide walks through the cycle as it applies to a bank's deposit accounts: what the IRS notice means, what a B-notice is, the clocks for each step, how second notices differ, how backup withholding starts and stops, and how TIN solicitation at account opening prevents most of it. The governing source is IRS Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s). Keep the current revision on hand, because the process detail matters.

Why Banks Get B-Notices

Banks report interest paid on deposit accounts on Form 1099-INT, and many also report dividends, broker proceeds, mortgage interest and payments to vendors. After those returns are filed, the IRS matches each payee's name and TIN against IRS and Social Security Administration records. Where something does not match, the IRS tells the payer.

The IRS distinguishes two problems:

  • Missing TIN. No TIN was provided, or it is obviously wrong in form: more or fewer than nine digits, or a letter mixed in.
  • Incorrect TIN. The TIN is in the proper format, but the name and TIN combination does not match, or cannot be found in, IRS or SSA files.

The distinction drives everything that follows. Missing TINs and incorrect TINs are handled differently, and only incorrect TINs get B-notices.

The CP2100 and CP2100A Notices

The IRS sends payers a CP2100 or CP2100A notice with a listing of missing, incorrect or not-currently-issued TINs from the returns they filed. The IRS issues these notices twice a year, generally in the fall and again in the spring. Which version a bank receives depends on how many errors it had. Under Publication 1281, large filers with 250 or more error documents receive the listing as a data file, mid-size filers (50 to 249) receive a paper CP2100, and small filers (under 50) receive a paper CP2100A.

Two practical points come up every year:

The notice may show another company's transmitter code. If the bank uses a vendor to transmit its information returns, the Transmitter Control Code on the notice may be the vendor's. The notice still belongs to the bank as payer.

The notice does not tell you whether it is a first or second notice. Publication 1281 is explicit: payers are responsible for tracking which notices they have received for each account. Your system has to remember.

First step: compare the listing to your records

Before sending anything to a customer, compare each account on the listing with the bank's records. Publication 1281 tells payers not to send a B-notice where the information does not agree with the bank's current records, for example because:

  • the bank reported the wrong information and has since corrected its records,
  • the customer's information changed after the return was filed, or
  • the IRS misprinted the bank's data.

In those cases, update your records if needed, use the correct information on future returns, and do not write to the IRS. You also do not file a corrected return just to fix a TIN, unless you are also changing a dollar amount.

Only accounts where the listing agrees with the bank's records go forward to the B-notice process.

The B-Notice: First Notice

A B-notice is the letter the payer sends the customer saying the IRS has told the bank their name and TIN do not match, and that backup withholding will apply unless they fix it. Publication 1281 includes the required text.

For the first notice on an account, the package is:

  • the First B-notice,
  • a Form W-9 (or acceptable substitute) for the customer to certify the correct TIN, and
  • an optional reply envelope.

The outer envelope must be clearly marked "IMPORTANT TAX INFORMATION ENCLOSED" or "IMPORTANT TAX RETURN DOCUMENT ENCLOSED." The TIN may not be solicited by telephone.

The clocks for a first notice

Step

Deadline under Publication 1281

Send the First B-notice

Within 15 business days from the date of the CP2100/CP2100A or the date received, whichever is later

Date on the B-notice

No later than 30 business days after the CP2100/CP2100A date or receipt date, whichever is later

Begin backup withholding if no signed W-9

No later than 30 business days after the CP2100/CP2100A date or receipt date, whichever is later (may begin the day after receipt)

Stop backup withholding after a signed W-9

No later than 30 calendar days after receiving it

 

Note the mix of business days and calendar days. The start clocks are business days; the stop clock is calendar days. Build both into whatever tracking tool you use.

When the customer returns a signed W-9, update the bank's records and use the certified TIN on future returns. Do not send the W-9 to the IRS.

The Second B-Notice

The second notice is where banks most often go wrong.

If the same account appears on a CP2100 or CP2100A for the second time within three calendar years, the bank sends the Second B-notice, and the process changes:

  • No W-9 is enclosed. A self-certification is not enough the second time.
  • The customer must get validation from the government. An individual provides a copy of their Social Security card showing the correct name and SSN. An entity contacts the IRS for a Letter 147C validating its EIN. Publication 1281 also covers ITINs (Letter 685C) and adoption TINs.
  • Reliance on a Social Security card is limited. The payer may rely on the card only if the name and SSN on it differ from those on the second B-notice, or if the card bears a date no earlier than six months before the date of the second B-notice.

The sending and dating deadlines are the same as for a first notice: send within 15 business days and date the notice no later than 30 business days after the CP2100 date or receipt date, whichever is later. The bank then allows 30 business days after the date of the second notice to receive the validation. If it does not arrive by the 30th business day, backup withholding begins and continues until validation is received; the bank may start earlier at its option. Withholding stops no later than 30 calendar days after the validation arrives.

Notices you can disregard

Publication 1281 sets out several situations where a second CP2100 does not require a second B-notice:

  • A second CP2100 received in the same calendar year as the first may be disregarded, even if it relates to a different tax year.
  • A second CP2100 in a different calendar year, but relating to the same payee account for the same calendar year as the first, does not require a second B-notice.
  • Third and later notices can generally be ignored if the bank completed the first and second notice process and the name, TIN and account number are unchanged. If the name and TIN combination is different, treat it as a new first notice.

This is the "two in three years" rule, and it is the reason tracking matters. A bank that cannot tell a first notice from a second notice will either send the wrong letter or withhold on the wrong schedule.

Returned mail

If a B-notice comes back undeliverable, Publication 1281 says the bank must begin backup withholding, while trying to find the correct address and remailing. If no address can be found, keep the undelivered notice for three years to track the two-in-three-year rule.

Missing TINs Follow a Different Path

For accounts on the listing because the TIN is missing, no B-notice is sent. Instead:

  1. Make sure backup withholding has started on reportable payments, and continue until a TIN is received.
  2. Make the required annual solicitations for the TIN, to protect the bank from penalties for filing returns without one.
  3. Report amounts withheld on Form 945.

The solicitation schedule for missing TINs, from Publication 1281:

  • Initial solicitation when the account is opened.
  • First annual solicitation by December 31 of the year the account is opened, or by January 31 of the following year for accounts opened in December.
  • Second annual solicitation by December 31 of the following year, if the TIN still has not been received.

No annual solicitation is required in a year in which no reportable payments are made. For incorrect TINs, sending the B-notice in response to the CP2100 satisfies the annual solicitation requirement.

TIN Solicitation at Account Opening

Most B-notices are created at the new-accounts desk, months before the IRS notices anything. The fix is at the front of the process.

Get a certified TIN on interest-bearing accounts. For interest and dividend payments, the customer must furnish a certified TIN on Form W-9 or an acceptable substitute. That certification is what protects the account from backup withholding.

Enter the legal name, not a nickname or trade name. The IRS matches on name controls. A sole proprietor's business name in the name field, or an entity account set up under an individual's name, generates a mismatch even when the TIN is right. Our post on opening business accounts covers entity documentation, and signature card requirements covers the account agreement side.

Handle "Applied For" correctly. For interest and dividends, a customer who has applied for a TIN can sign a W-9 with "Applied For" in the TIN box, an awaiting-TIN certificate. The customer then has 60 calendar days from when the bank receives it to provide the TIN. During those 60 days the bank must apply one of the rules described in Publication 1281, either a reserve rule tied to withdrawals over $500 or one of two alternative rules that start withholding after a seven-business-day grace period. If the TIN does not arrive, backup withholding begins.

Validate before you file. Payers of interest and other income reported on Forms 1099 may be eligible for the IRS TIN Matching program, which lets a payer check name and TIN combinations against IRS records before returns are filed, interactively or in bulk. Running new accounts, or the whole file, through TIN Matching before year end catches problems while the customer can still be asked. It is the most underused control in the cycle.

Backup Withholding Mechanics

Backup withholding is currently 24 percent of reportable payments, such as interest, made to a payee who is subject to it. Once withholding begins:

  • Withhold on each reportable payment to the account until the triggering condition is cured.
  • Deposit withheld amounts and report them annually on Form 945, Annual Return of Withheld Federal Income Tax.
  • Show the amount withheld on the customer's information return.

A bank that is required to withhold and fails to do so can be liable for the amount it should have withheld. That is why both sides of the clock matter: starting late creates liability, and stopping late withholds money from a customer who has done what was asked.

Not every payment is subject to backup withholding. Publication 1281 lists exclusions that include distributions from retirement accounts, cancelled debt, and real estate transactions. If your bank's IRA area or loan servicing area receives questions, they need to know this.

Penalties and Reasonable Cause

The B-notice and solicitation process is not only about withholding. It is how a bank shows reasonable cause if the IRS proposes penalties for information returns filed with missing or incorrect TINs, usually through a proposed penalty notice. A bank that can show it made the required initial and annual solicitations, sent the correct B-notices on time and started withholding when required is in a defensible position. A bank that cannot is not. IRS Publication 1586 explains the reasonable cause standards for missing and incorrect TINs.

Keep the evidence: the CP2100 and listing, the date received, copies or images of the B-notices sent with their dates, envelopes returned, W-9s and validation letters received, and withholding start and stop dates by account.

Building the Annual B-Notice Process

A bank that treats each CP2100 as a fire drill will miss deadlines. A bank that has a written process will not. The core elements:

  1. Owner and backup. Name the person who receives IRS notices and the backup who covers the fall and spring cycles.
  2. Date-stamp the notice on receipt, because several deadlines run from the later of the notice date and the receipt date.
  3. Compare the listing to current records and document the disposition of each account.
  4. Notice history. Track, per account, every CP2100 received and every B-notice sent, so first versus second is a lookup, not a guess.
  5. Use the Publication 1281 text, the correct enclosures and the marked envelope.
  6. Diary the 15-business-day send date, the 30-business-day withholding date and the 30-calendar-day stop date.
  7. System flags. Make sure the core system actually starts and stops withholding on the right accounts on the right dates, and test it.
  8. Branch scripts. Tell frontline staff what to say when a customer brings in a B-notice, and where to send a W-9, Social Security card copy or Letter 147C.

The fall CP2100 cycle often lands in the same months as year-end information reporting preparation, so plan staffing with both in view. Our year-end bank compliance checklist and 1099 reporting for banks cover the surrounding work.

Training for the Cycle

Three groups need to understand this process at different depths.

  • New-accounts and universal bankers need to know why the legal name and a certified TIN matter, and how to handle "Applied For."
  • Branch staff generally need to recognize a B-notice when a customer brings one in, and know that a second notice needs a Social Security card or IRS letter, not a W-9.
  • Deposit operations and tax reporting staff need the full cycle: intake, reconciliation, letters, clocks, withholding, Form 945 and penalty response.

The Current Issues in TIN Validation and B-Notices webinar is aimed at the staff who run this process. For the reporting side, the Basics of 1099 Reporting webinar covers the forms the CP2100 is matched against.

Next Step

If your bank's B-notice process lives in one person's head, write it down before the next CP2100 arrives, and train the people who will run it. The Current Issues in TIN Validation and B-Notices webinar is a practical place to start.

Frequently Asked Questions

What is a B notice?

A B-notice is a backup withholding notice a payer, such as a bank, sends to a customer after the IRS reports that the name and taxpayer identification number on the customer's Form 1099 did not match IRS or Social Security records. It tells the customer to provide a correct, certified TIN or face backup withholding on reportable payments like interest. A first B-notice includes a Form W-9. A second B-notice, sent when the same account is flagged twice within three calendar years, requires validation from the SSA or IRS instead.

How long does a bank have to send a B notice?

Under IRS Publication 1281, the bank must send the B-notice within 15 business days from the date of the CP2100 or CP2100A notice, or the date the bank received it, whichever is later. The B-notice itself must be dated no later than 30 business days after that same date. If the customer does not return a signed W-9 after a first notice, backup withholding must begin no later than 30 business days after the CP2100 date or receipt date. Date-stamp every CP2100 on arrival so the clocks can be proven.

What is the difference between a first and second B notice?

A first B-notice goes out the first time an account appears on a CP2100 listing, and includes a Form W-9 the customer can sign to certify the correct TIN. A second B-notice goes out when the same account appears again within three calendar years. It does not include a W-9. Instead, an individual must provide a copy of their Social Security card, and an entity must get an IRS Letter 147C validating its EIN. Without that validation within 30 business days, backup withholding begins.

What is the backup withholding rate?

The backup withholding rate is 24 percent of reportable payments, a rate that has applied to payments made after December 31, 2017, according to IRS Publication 1281. For a bank, the most common reportable payment subject to backup withholding is deposit interest reported on Form 1099-INT. Withheld amounts are deposited, reported annually on Form 945, and shown on the customer's information return. Some payment types, such as retirement account distributions and cancelled debt, are excluded from backup withholding.

What is TIN validation?

TIN validation means confirming that a customer's name and taxpayer identification number match government records. At account opening, it starts with a certified Form W-9 and accurate entry of the legal name. Before filing, eligible payers can use the IRS TIN Matching program to check name and TIN combinations interactively or in bulk. After a second B-notice, validation has a specific meaning: a copy of the Social Security card for individuals, or an IRS Letter 147C for an EIN, provided by the customer.

Can a bank ignore a CP2100 notice?

Not entirely, but some notices need no customer letter. Publication 1281 lets a payer disregard a second CP2100 received in the same calendar year as the first, and generally ignore third and later notices once the first and second B-notice process is complete for the same name, TIN and account. Accounts that do not agree with the bank's records need a records update, not a B-notice. Missing-TIN accounts get withholding and annual solicitations instead. Every account on the listing still needs a documented disposition.