rp-14-43.pdf

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Procedures to avoid backup withholding

# Revenue Procedure 2014-43

## SECTION 1. PURPOSE

This revenue procedure provides revised procedures for individual payees who
are required under Treas. Reg. § 31.3406(d)-5(g)(5) to obtain validation of social
security numbers (SSNs) from the Social Security Administration (SSA) to prevent or
stop backup withholding under section 3406 of the Internal Revenue Code following
receipt of a second backup withholding notice from a payor within a three-year period.
SECTION 2. BACKGROUND

Section 3406(a) of the Internal Revenue Code prescribes circumstances in which
a payor must backup withhold on reportable payments it makes to a payee, including
when the IRS notifies a payor that the taxpayer identification number (TIN) furnished by
the payee to the payor is incorrect. In the case of an individual, a TIN is generally an
SSN. See section 6109(d). Pursuant to section 3406(a)(1)(B) and (h)(8) and section
31.3406(d)-5, a payor (such as a bank) must send a notice to a payee after being
notified by the IRS or a broker that the payee provided an incorrect name and TIN
combination with respect to an account (the B notice). The B notice informs the payee
that the name/TIN combination furnished to the payor does not match IRS or SSA
records and describes the steps the payee must take to stop or prevent backup
withholding from payments made after receipt of the B notice.

Pursuant to section 31.3406(d)-5(d) and (f), a payor that receives a notification

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from the IRS or a broker of a name/TIN mismatch for an account must send the payee a
B notice. If this is the only notification of a name/TIN mismatch received by the payor
with respect to the account during the past three years, the B notice, referred to as a
"first B notice," must instruct the payee to provide a signed Form W-9, "Request for
Taxpayer Identification Number and Certification," to the payor to stop or prevent
backup withholding. If the payor receives a second notification from the IRS or a
broker of a name/TIN mismatch with respect to an account, and this notification is
received within three years from the date of a previous notification of a name/TIN
mismatch with respect to that account, section 31.3406(d)-5(g) requires the payor to
send the payee another B notice, referred to as a "second B notice." Under section
31.3406(d)-5(g)(1)(i), a TIN certified on a Form W-9 is not sufficient to stop or prevent
backup withholding after a second B notice is sent. Instead, after a second B notice,
the payor must receive validation of the payee's name and TIN combination from the
SSA or the IRS to stop or prevent backup withholding.

Section 31.3406(d)-5(d)(2)(i) and (g)(2) provides that the procedural
requirements for B notices, such as the form of the notice and the manner of delivery,
will be set forth in the Internal Revenue Bulletin. These rules are described in Rev.
Proc. 93-37, 1993-2 C.B. 477, and Publication 1281, "Backup Withholding for Missing
and Incorrect Name/TIN(s)." That revenue procedure and publication provide specific
instructions regarding TIN validation, which must be included in the second B notice
sent to payees.

Under section 6 of Rev. Proc. 93-37, in the case of a second B notice, an
individual payee obtains validation of the payee's name and SSN by requesting and

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authorizing SSA to send Form SSA-7028, "Notice to Third Party of Social Security
Number Assignment," to the payor. Effective January 1, 2010, SSA discontinued Form
SSA-7028 for verifying SSNs to prevent or stop backup withholding. Because payees
could no longer comply with section 6 of Rev. Proc. 93-37 after SSA discontinued the
Form SSA-7028, the IRS issued Announcement 2010-41, 2010-25 I.R.B. 767, to
provide interim procedures for name and SSN validation by SSA. Under these interim
procedures, an individual payee obtains validation of the payee's name and SSN from
the SSA by contacting the local SSA office and requesting a social security number
printout (SSN printout). Once the payor receives a copy of the SSN printout from the
payee, backup withholding is prevented or terminated. Effective August 1, 2014, SSA
will discontinue providing SSN printouts.

### SECTION 3. CHANGES

This revenue procedure sets forth revised procedures for an individual payee to
obtain validation of the payee's name and SSN from SSA on or after August 1, 2014.
Under these revised procedures, following receipt of a second B notice, a copy of a
social security card, as described in section 4, is validation from the SSA of a name and
SSN combination. This revenue procedure instructs payors and individual payees
regarding these revised procedures.

#### SECTION 4. REVISED PROCEDURES

In response to a second B notice, the requirements of section 31.3406(d)-5(g)
will be satisfied if an individual payee provides the payor with a copy of a social security
card with his or her correct name and SSN. Payors may rely upon a social security card
as being correct only if the name and SSN combination appearing on the card differ

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from the name and SSN combination appearing on the second B notice, or if there is a
date appearing on the social security card that is no earlier than six months prior to the
date of the second B notice. If a payee does not have a social security card, the payee
must obtain a new or replacement social security card from the SSA. If the payee's
name and SSN combination listed on the second B notice is not current or correct, the
payee should update his or her records with the SSA and provide a copy of the updated
social security card to the payor. A payee may obtain a social security card for free by
filing Form SS-5, "Application for a Social Security Card," with the SSA. The application
form and information regarding required supporting documentation are available at
www.socialsecurity.gov. Under section 31.3406(d)-5(g)(3), a payor who receives a
copy of a payee's social security card meeting the requirements specified in this
revenue procedure will not be required to commence backup withholding and may stop
backup withholding on reportable payments made to that payee. Pursuant to section
3406(h)(9) and section 31.3406(d)-5(h), the payor must use the name and SSN
combination provided pursuant to this revenue procedure on future information returns
and statements if the payor is subject to future information reporting with respect to the
account.

Publication 1281 will be revised consistent with this revenue procedure and is
available on irs.gov. Payors should use the language provided in Publication 1281 to
instruct payees regarding the revised procedures described in this revenue procedure
for validating a payee's name and SSN after a second B notice.

#### SECTION 5. EFFECT ON OTHER DOCUMENTS

Announcement 2010-41 is obsoleted. Sections 5.02(1), (2), (3)(c)(i), and

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(3)(e)(i)-(iii) of Rev. Proc. 93-37 are modified and superseded with respect to the form
and content of the second B notice. Section 6.02(1) of Rev. Proc. 93-37 is modified and
superseded with respect to the form and content of the validation in the case of a
second B notice for a name/TIN mismatch.

#### SECTION 6. EFFECTIVE DATE

This revenue procedure is effective for name and SSN validation under section
31.3406(d)-5(g) provided to payors on or after August 1, 2014. Before that date, payors
may accept copies of social security cards that provide name and SSN validation under
the revised procedures described in this revenue procedure, or an SSN printout.

#### SECTION 7. DRAFTING INFORMATION

The principal author of this revenue procedure is Hollie M. Marx of the Office of
the Associate Chief Counsel (Procedure and Administration). For further information
regarding this revenue procedure contact Hollie M. Marx on (202) 317-6844 (not a toll-
free call).