IRS B-Notice Rules: First vs.
Second Notice Explained

What Is a B-Notice?

A B-Notice (short for "backup withholding notice") is a letter that a payer must send to a payee when the IRS reports that the payee's name/TIN combination does not match its records. The term comes from IRS Publication 1281, which provides the official rules and sample language for these notices.

B-Notices are not something the IRS sends to payees directly. Instead, the IRS sends a CP2100 or CP2100A notice to you (the payer), listing the payees with mismatched TINs. Your obligation is then to forward the appropriate B-Notice to each listed payee. Think of it as the IRS delegating the correction process to you.

The B-Notice process has two distinct phases, and the rules differ significantly depending on whether you are sending a First B-Notice or a Second B-Notice for a given payee. Getting this distinction wrong can expose you to IRS penalties and unnecessary backup withholding.

First B-Notice: Rules and Requirements

A First B-Notice applies when a payee appears on a CP2100 notice for the first time (or for the first time in more than three calendar years). Here is what you need to know:

When to Send It

You must mail the First B-Notice within 15 business days of the date on your CP2100 notice. This deadline runs from the notice date printed on the CP2100, not from the date you received or opened the letter. If your organization has a mail processing delay, those lost days count against your 15-day window.

What to Include

IRS Publication 1281 specifies the required content for a First B-Notice:

• A statement that the IRS has informed you that the payee's name and TIN do not match IRS records
• A request for the payee to provide their correct name and TIN
• A blank Form W-9 (Request for Taxpayer Identification Number and Certification)
• A statement that you are required to begin backup withholding if the payee does not respond within 30 calendar days

You may use your own letterhead and language, but the substance must cover these four points. Many organizations use the sample letter in Publication 1281 verbatim to avoid any risk of non-compliance.

How the Payee Responds

In response to a First B-Notice, the payee simply needs to complete and return the W-9 form with their correct legal name and TIN. When you receive the completed W-9, you should immediately verify the name/TIN combination using IRS TIN matching before updating your records. A payee may inadvertently return a W-9 with the same incorrect information or new errors.

What If the Payee Does Not Respond?

If the payee does not return a corrected W-9 within 30 calendar days of the date you mailed the First B-Notice, you must begin backup withholding at 24% on all reportable payments to that payee. The withholding must continue until the payee provides a certified TIN.

Second B-Notice: Stricter Rules Apply

A Second B-Notice applies when the same payee appears on a CP2100 notice for the second time within a three-calendar-year window. The IRS treats a recurring mismatch as a more serious compliance failure, and the rules become significantly more restrictive.

The Three-Year Lookback Rule

The IRS uses a rolling three-calendar-year window to determine whether a B-Notice is first or second. If a payee appeared on a CP2100 in any of the three calendar years before the current notice, the new notice triggers Second B-Notice rules. For example, if a payee was on your 2023 CP2100 and appears again on your 2026 CP2100, that is a Second B-Notice. If the gap is longer than three calendar years, the slate resets and you send a First B-Notice.

Key Difference: W-9 Is Not Enough

Under Second B-Notice rules, the payee cannot resolve the mismatch by simply submitting a new W-9. Instead, the payee must contact the IRS or SSA directly to validate their TIN:

• For SSNs -- The payee must contact the Social Security Administration to verify that their name and SSN match SSA records.
• For EINs -- The payee must contact the IRS to confirm that their name and EIN match IRS records.

The payee must then provide you with written confirmation from the IRS or SSA that their TIN has been validated. Until you receive this confirmation, you cannot stop backup withholding.

Backup Withholding Starts Immediately

Unlike a First B-Notice, where you wait 30 days for a payee response before starting backup withholding, a Second B-Notice typically requires you to begin backup withholding immediately upon sending the notice. The 30-day grace period does not apply to Second B-Notices in most circumstances. Check Publication 1281 for the specific timing rules that apply to your situation.

First vs. Second B-Notice: Side-by-Side Comparison

IRS Publication 1281: Your Authoritative Reference

IRS Publication 1281 (Backup Withholding for Missing and Incorrect Name/TIN(s)) is the definitive guide to B-Notice rules. It provides:

• Sample First and Second B-Notice letters you can use or adapt
• Detailed instructions for determining whether a notice is first or second
• Rules for when backup withholding must start and stop
• Guidance on record retention requirements
• Special rules for different types of payments and accounts

If you are responsible for B-Notice compliance at your organization, Publication 1281 should be on your desk. It is the document the IRS will reference if they examine your compliance procedures.

W-9 Solicitation Requirements

The W-9 solicitation is the core action item in the First B-Notice process. Here are the rules:

Initial Solicitation

Every payer must request a W-9 from each payee at the time of the initial transaction or account opening. This is your "initial solicitation." If you failed to collect a W-9 at vendor onboarding, you are already on weak footing if a CP2100 arrives.

Annual Solicitation

If a payee has not provided a TIN and you are making reportable payments, you must solicit the TIN at least annually. This is separate from the B-Notice process -- it applies even without a CP2100.

B-Notice Solicitation

The B-Notice itself counts as a solicitation. If the payee does not respond to the First B-Notice within 30 days, you must begin backup withholding. You are not required to send additional solicitations before starting to withhold, but many organizations send reminder letters as a courtesy -- and to strengthen their reasonable cause documentation.

Backup Withholding at 24%: The Enforcement Mechanism

Backup withholding is the teeth behind the B-Notice process. When a payee fails to respond to a B-Notice (or when you are in a Second B-Notice situation), you must withhold 24% of all reportable payments and remit that amount to the IRS. This applies to payments including non-employee compensation, rents, royalties, interest, dividends, and other amounts reported on 1099 forms.

The critical point: the IRS holds the payer (you) responsible for the withholding amount, regardless of whether you actually deducted it from the payee's payment. If you should have been withholding but did not, you owe the IRS the 24% yourself, plus potential penalties and interest.

Reasonable Cause Defense for B-Notice Compliance

Under IRC Section 6724, you can avoid penalties related to incorrect TINs by demonstrating "reasonable cause." In the context of B-Notices, reasonable cause means you can show that:

1. You had established procedures for collecting and verifying TINs at vendor onboarding
2. You responded to CP2100 notices within the required timeframes
3. You sent properly formatted B-Notices using the language from Publication 1281
4. You began backup withholding when required
5. You used the IRS TIN Matching Program (or a service like TINCorrect that connects to it) to verify TINs both at onboarding and before filing

IRS Publication 1586 provides detailed guidance on what constitutes reasonable cause for information return penalties. Participation in the IRS TIN Matching Program is specifically identified as an element of a due diligence program.

Common B-Notice Mistakes to Avoid

• Treating every notice as a First B-Notice -- You must track which payees have received prior B-Notices within the three-year lookback window. Sending a First B-Notice when you should be sending a Second B-Notice means you are not complying with the rules.
• Missing the 15-business-day deadline -- Late B-Notices undermine your compliance documentation. Build a process that triggers immediately when a CP2100 arrives.
• Accepting a W-9 without verification -- A returned W-9 might contain the same incorrect information. Always run the new TIN through TIN matching before accepting it.
• Failing to start backup withholding -- If a payee does not respond, withholding is mandatory, not optional. Delaying backup withholding creates liability equal to the amount you should have withheld.
• Not documenting the process -- Keep copies of every B-Notice, every returned W-9, every TIN match result, and every backup withholding decision. This is your reasonable cause evidence.

How to Track B-Notice Status Across Vendors

Managing B-Notice compliance across a large vendor population requires systematic tracking. For each payee that appears on a CP2100, you need to track:

• The CP2100 notice date and tax year
• Whether this is a First or Second B-Notice (check the three-year lookback)
• The date you mailed the B-Notice
• The payee response date and method (W-9 return or IRS/SSA validation)
• TIN matching verification results for the corrected information
• Backup withholding start date (if applicable) and stop date

Organizations that maintain a clean vendor master file have a much easier time managing this process. When your vendor data is well-organized and regularly verified, B-Notice tracking becomes an extension of your existing vendor compliance workflow rather than an emergency fire drill.

Preventing B-Notices Through Proactive TIN Matching

The best B-Notice is the one you never have to send. By verifying every name/TIN combination before filing your 1099s, you eliminate the mismatches that trigger CP2100 notices and the B-Notice process entirely.

TINCorrect makes it practical to verify TINs at every stage of the vendor lifecycle -- at onboarding, during periodic vendor master file reviews, and again before 1099 filing. When every TIN on your filings matches the IRS database, the CP2100 notices that trigger B-Notices simply do not arrive.

Author

Ken Ham

Founder at TINCorrect

Passionate about making tax identity verification simple so businesses can focus on what matters.