Articles and Tax Tips
On June 2, 2010 The Internal Revenue Service (”IRS”) announced the long awaited change in procedures for individual payees to follow for obtaining 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 “B-notice” from a payor.
This announcement (Announcement 2010-41) follows last year’s decision by the SSA to discontinue Form SSA-7028, ostensibly because the SSA legal team determined SSA-7028 lacked the ability to qualify as proper third party notification. Such a huge change had left many unanswered questions for those of you processing IRS B-Notices; questions that can now be answered. Though the Information Reporting Advisory Committee (IRPAC) spoke with both the IRS and SSA, and issued a letter to the IRS on May 15, 2009 seeking further guidance and making several logical requests for clarification and guidance moving forward regarding processing 2nd B-Notices; it was only on June 2nd that the IRS announced their new recommendations.
The following article will first summarize Form SSA-7028’s previous role in the processing of a B-Notice (a notice that the name/TIN combination submitted on an information return has failed to match either IRS or SSA records). Then, it will explain what Announcement 2010-41 (which will be published in IRB 2010-25 on June 21, 2010) means for you in regards to not only how you process this spring’s B-Notices but also revamping your B-Notice processing policies and procedures.
By Steven D. Mercatante Esq.