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The webinar will begin at 1:00 pm Central. Audio for this event will be available via your PC speakers or headphones. This will be the default option. If you are unable to listen to your PC audio, please join the teleconference using the following information: Call-in toll-free number (US/Canada) - 1-877-668-4493 Call-in toll number (US/Canada) - +1-408-600-3600 Access code: 929 933 238
WELCOME!
Comply + Connect (C2) Summit 2013
October 20-22, 2013 – Orlando, FL Omni ChampionsGate Resort
Register Now! BOGO ½ Off! c2summit.convey.com 1-888-303-1099 [email protected]
CPE Credit Eligible
This webinar is eligible for 1 CPE credit for participating Must attend entire webinar Must answer all CPE polls
You will receive your certificate via
email within 3 weeks
Agenda
“B” Notice Process Overview Penalty Notice (P Notice) Process Overview Eliminating Notices
Proactive Validation Solicitation Packets
B & P Notice Best Practices Abatement Best Practices Additional Resources
Non-CPE Poll # 1
Approximately, how many forms do you currently file each year? 0-1,000 1,001-25,000 25,001-100,000 100,000+ I don't know
Proactive vs. Reactive
Proactive Reactive
Data Clean-up Real-Time TIN/OFAC/DM
F
TIN Matching
General Solicitation
Delivery
Response Gathering- Validating- Importing
Timeline
January •Print and Mail 1099s
April •Transmit Records to IRS
October •Receive CP2100(A) •Send Solicitations
November •Collect Responses •Updating Records •Start/Stop Backup
Withholding
August •Receive 972CG •Send Solicitations •Respond to Penalty
Notice
What is a “B” Notice?
Backup Withholding Notice due to Missing or Incorrect Name/TINs
Form Types Include: 1099-B 1099-Div 1099-Int 1099-Misc 1099-OID W-2G
1099-K
CP2100 or CP2100A Based on Prior Year Transmittal(s)
What Do I Have to Do?
Search for any accounts that have the same name/TIN combination
For Matches
For Non Matches No Solicitation Required
15 business days to send “B” Notice solicitation
15 business days to respond
If you fail to gather correct information, you must begin back-up withholding! You should withhold immediately for missing TINs
First or Second “B” Notice?
IRS Does Not Track This For You! “Two-in-three year” rule First “B” Notice if: An account identified on one “B” Notice An account identified on two “B” Notices outside
of three calendar years
Second “B” Notice if: An account identified on two “B” Notices within
three calendar year
What To Send
Cover letter From W9 (or substitute) Optional Reply Envelope Do Not File a Corrected Return
First B Notice
Second B Notice Cover letter
SSA Printout
Optional Reply Envelope
Do Not File a Corrected Return Form W-9 Does NOT satisfy a Second “B” Notice
Now What? 1st “B” Notice Did you receive a W9 within 30 days?
Yes Update records with certified name/TIN
No Begin backup withholding within (by) 30 business days.
2nd “B” Notice Did you receive a SSN Printout or 147C(Business
Equivalent) within 30 days? Yes
Update records with certified name/TIN No
Begin backup withholding within (by) 30 business days.
CPE Poll Question #2:
Who is responsible for tracking 1st and 2nd “B” Notices?
a. The IRS b. The Payor c. The Recipient d. Don’t need to track
Notice of Proposed Penalty
What is Penalized? Records file with a missing/incorrect TIN Late returns Bad format (wrong media)
Penalties: Time of Filing Penalty Maximum
30 days or less $30 $250,000
Before August 1st $60 $500,000
After August 1st $100 $1,500,000
Intentional Disregard $250 No Limitation
Response to 972CG The notice should be answered within 45
days. Request an Extension within the 45 day window
Payer can abate the penalty by establishing reasonable cause: Perform required actions for “B” Notices
Perform annual solicitations for missing TINs
Perform annual solicitations for incorrect name/TINs
Penalty not imposed if:
1
2
3
One-half of one percent of total returns
972CG Solicitations
Solicitation Process Similar to B Notices Do not need to send if a B Notice was
sent for the same year. 1099-R Form
30 days to send solicitation
45 days to respond
Can include W-4P
CPE Poll Question #3
How many business days do you have to send out your W-9 solicitation after receiving the first “B” Notice? 7 15 30 45
Most Of Us Follow A Basic Process
File 1099s
Receive B Notices
Send W9s Receive 972CG
Write Abatement
That Process Is Reactive
Tax Identity Management
B&P Notice Processing
W-9 Solicitation
Delivery
Response Gathering, Validating, Importing
Backup Withholding Reporting
Non-CPE Poll # 2
Approximately, how many B-Notices do you receive each year? 0-100 101-5,000 5,000-25,000 25,000+ I don't know
Four Steps to Correct Your Data
Identify Bad Name/TIN
Solicit Corrections
Collect Responses
Update source systems
Step One… Know What You Don’t Know
Identify Bad Name/TIN
• Wait for B-Notice
• Real-time TIN match
• IRS Bulk TIN Match
Solicit Corrections
Collect Responses
Update source systems
Real-Time TIN Verification
One-time payments When payment is immediate/COD Very difficult to correct after the fact
TIN Matching
IRS E-Services Interactive TIN Matching Bulk TIN Matching Publication 2108A Backup Withholding Forms
Signing up takes time, requires SSN, AGI, Officer of Company
Account Initiation
Initial Information or W-9 is wrong! Leads to a “B” Notice next year
There is a better way! IRS Interactive
TIN Matching Guarantee correct
information Integrated with
source system
Step Two…Reach Out and Touch Someone
Identify Bad Name/TIN
• Wait for B-Notice
• Real-time TIN match
• IRS Bulk TIN Match
Solicit Corrections
• Mail • Phone call • eMail • In person
Collect Responses
Update source systems
Solicitation Packets
Mail a W9 (or substitute)
Letter or Self Mailer
Telephone/Customer Service
Portal on Website
Step Three… Get Your Answers
Identify Bad Name/TIN
• Wait for B-Notice
• Real-time TIN match
• IRS Bulk TIN Match
Solicit Corrections
• Mail • Phone call • eMail • In person
Collect Responses
• Web • In person • Phone • Mail • Fax
Update source systems
Step Four… Straighten Out Your Systems
Identify Bad Name/TIN
• Wait for B-Notice
• Real-time TIN match
• IRS Bulk TIN Match
Solicit Corrections
• Mail • Phone call • eMail • In person
Collect Responses
• Web • In person • Phone • Mail • Fax
Update source systems
• Manual keying
• Spreadsheet management
• Automated imports
The Complete Package…
Identify Bad Name/TIN
• Wait for B-Notice
• Real-time TIN match
• IRS Bulk TIN Match
Solicit Corrections
• Mail • Phone call • eMail • In person
Collect Responses
• Web • In person • Phone • Mail • Fax
Update source systems
• Manual keying
• Spreadsheet management
• Automated imports
A comprehensive solution involves implementing business processes to manage each piece of the tax identity management continuum !
Evolution of ID Management
Tax Identity Management
Real-Time
TIN/OFAC/DMF
TIN Matching
General Solicitation
Delivery
B&P Notice
Processing W-9 Solicitation
Delivery
Response Gathering, Validating, Importing
Backup Withholding Reporting
Proactive Reactive
Proactive Process
Identify Incorrect Information No Rules on How to Solicit
or Collect Data Multipronged Approach
Solicit Collect
Responses Update Data TIN Match
The IRS has strict phishing rules. A violation leads to a 96 hour lockout!
B & P Notice Best Practices
Load/Input/Mail notices ASAP Match against current data Timer starts at notice date OR date
you received from the IRS.
Apply “2 in 3 year rule” 1 mailing per year (supplemental) “B” Notice mailing satisfies
penalty notice
First B Notice
Matching Data Against Prior Data Will Lead to More Notices!
B & P Notice Best Practices
Your cover letter should be clear and easy to understand
Include phone number, website, or FAQ information for questions
Generally don’t file corrections based on W9s
Source system updates Automate the process
Second B Notice
Abatement Best Practices
Documentation is Key!
Process and Procedures
Year over Year Progress
Metrics
Mailed
Responses
No Responses
W9 & Other Documentation
Sample Abatement Letter
Reasonable Cause
History of filing with correct TINs/Names
Payee provided incorrect information
Payee didn’t respond
Must Respond Within 45 Days
CPE Poll Question #4:
What is one way you can proactively reduce “B” and Penalty Notices?
a. Complete Form 5457 b. File your returns early to the IRS c. Use the IRS TIN Matching program d. Mail Form W-4P to all recipients
Key Takeaways
The best way to deal with “B” Notices is to eliminate them. Take advantage of the IRS TIN Matching program. Document everything. Utilize tools and automation to minimize manual work and reduce or eliminate notices.
1
2
3
4
CPE Poll Q Review
Who is responsible for tracking 1st and 2nd “B” Notices?
- The Payor
How many business days do you have to send out your W-9 solicitation after receiving the first “B” Notice?
- 15
What is one way you can proactively reduce “B” and Penalty Notices?
- Use the IRS TIN Matching program
Taxport Compass
• All-in-one 1099 Information • Actionable Steps • Federal, State, Canada, Puerto
Rico • Reporting & Withholding for 40+
jurisdictions • Email Alerts • Constantly updated by a team
of Convey Tax Experts
Available for Presale Now!