Good Afternoon, As you are aware, the Internal Revenue Service (IRS) issues CP2100 Notices each year towards year-end. B-Notices and potential backup withholding follow for merchants appearing on their impact list, and the IRS provides an extremely limited timeframe to resolve any issues. Since you may have merchants who are subject to the IRS’ CP2100 Notice for the 2021 tax year, we want to provide the following to ensure you are familiar with the process we will follow, and that you have sufficient information should your merchant contact you for information. Backup withholding is a method used by the IRS to make sure it collects taxes on certain income like card processing transactional income. Withholding is imposed on merchants who have been identified by the IRS as having a Personal/ Business Name and/or TIN mismatch; IRS law (code section 3406) requires that we perform federal backup withholding of 24% on gross reportable sales in that instance. Some states also impose withholding penalties (e.g., California: 7%, Vermont: 6.72%, Maine: 5%). Additionally, the merchant may be subject to a $50 penalty by the IRS for failing to provide a correct taxpayer identification. Note that there is ongoing consideration by other states regarding requirements for backup withholding. This means that where other states implement requirements for backup withholding, we will be obligated to withhold additional amounts from your account. Within the next 1-2 weeks, merchants will receive an email and physical B-Notice letter making them aware of the deadline and specific tax documents required to prevent or stop backup withholding. The email will provide a means to download and mail or fax a completed form for processing. It will also include a link to DocuSign® that can be used by the merchant to complete and submit a W-9 electronically. The tax document required from the merchant depends on the type of notice issued: 1st B-Notice: Completed and signed W-9 form. 2nd B-Notice: An IRS issued LTR147C, SS4 letter, or SSN card (sole proprietors). A W-9 will NOT be accepted for a 2nd B-Notice because we received notification from the IRS that the merchant also did not match for a previous tax year, and the merchant can no longer resolve this issue with a W-9. Merchants who fail to provide the required tax document by the deadline indicated in the B-Notice communication will be subject to federally mandated backup withholding. Note that if a merchant is subject to IRS backup withholding, the funds will be remitted to the IRS and reported on their annual 1099-K. Therefore, merchants may need to seek assistance from a tax professional for help in recovering their withheld funds. Corporate Name Changes & Rewrites If a Form W-9, SS-4 Letter, or LTR 147c is received in response to a TIN solicitation that provides a Legal Business Name (Corporate Name) that is different from what was on the original application or currently on record, this may result in a Corporate Name Change process or a rewrite of the merchant application. To correct a Legal Business Name, the merchant must follow the instructions on the business information change form. If there is a change to both the merchant's Legal Business Name and TIN, a new merchant application may be required. The tax document cannot be processed, and backup withholding (if applicable) cannot be removed until the new Legal Business Name/TIN appears in our systems. 1099K Compliance does NOT manage corporate name changes or the rewrite process. Sending a Business Information Change form or a new merchant application to 1099-K Compliance may result in processing delays as the document(s) must be forwarded to the correct department for processing. Important note: If a merchant is subject or on backup withholding, the backup withholding can only be removed after the processing of the tax form. Closed Accounts. Accounts in closed status are included in B-Notices. Because the merchant appeared on a CP2100 Notice, we are therefore obligated per IRS regulations to follow up on the matter regardless of the account status. Additionally, the tax documents collected aid in mitigating IRS penalties that follow. IRS penalties. The Internal Revenue Service (IRS) assesses a penalty when a Form 1099-K is filed with an inaccurate combination of a merchant's Legal Business Name and TIN. A W-9 Form, IRS EIN-issuing document, SS-4 letter, or LTR 147c, are the only acceptable documents that may be used as supporting evidence to defend the penalty assessment. The current penalty rate is $280 per inaccurate 1099-K. NAB makes every effort to mitigate the IRS penalty assessment but there is no guarantee that the IRS will reduce or waive penalties. Per the 1099-K Policy Statement, this penalty may be passed on to your merchant or to you. Standard Service Times 1099-K inquiries and tax documents are processed in the order they are received, on a first-come, first-serve basis. During periods of high-queue volume, longer service times may be experienced. There are no service-level agreements associated with the 1099-K Program, unless the merchant is subject to backup withholding. The current response time for backup withholding responses is 30 calendar days. If the merchant requires a change to their corporate name or requires a rewrite of their merchant application, this may increase the processing time for the tax document. Helpful Tips to Prevent Mismatches Avoid these other common causes for TIN mismatches: Sole Proprietors filing with a Social Security Number (SSN) may use an SSN as their TIN. All other business types must supply a valid Employer Identification Number (EIN). Do not deviate from what appears on the tax document. For example, do not substitute “Auto” for “Automotive” or “Corp” for “Corporation.” Do not substitute “&” for the word “and” unless that is how it appears on the tax document. Social Security Numbers and Employer Identification Numbers are always 9 digits in length. The best resources to address questions may be found in the 1099-K Policy statement, 1099K Policy Statement FAQ, and 1099K Best Practices, which are located in the Sales Partner Portal. For a complete list of your merchants who have a TIN/name mismatch on file with us, or for answers to any questions, please contact your Relationship Manager at 844-334-9625 or reply to this email. You can also log in to the Sales Partner Portal to check the TIN status listed under the Merchant tab. Thank You, PayProTec © 2021 PayProTec, LLC. All rights reserved. PayProTec, LLC is a registered ISO of Wells Fargo Bank, N.A., Concord, CA., The Bancorp Bank, Philadelphia, PA, BMO Harris N.A., Chicago, IL and Citizens Bank N.A., Providence, RI.