CUNA Regulatory Comment Call
August 6, 2002
IRS Proposal Concerning Incorrect Taxpayer (Member) ID Numbers and Backup Withholding
- The Internal Revenue Service (IRS) issued a notice of proposed rulemaking with regard to backup withholding. The regulations clarify the method of determining whether the payor (credit union) has received two notices that a payee's (member's) taxpayer identification number (TIN) is incorrect. If a payor receives two or more notices with respect to the same account during a three-year period, the payor must begin backup withholding unless the payee provides verification of its correct TIN.
- Backup withholding means that payors making certain payments to payees must withhold and pay to the IRS a specified percentage of those payments under certain conditions. Backup withholding can apply to most kinds of payments that are reported on Form 1099, including: interest payments (Form 1099-INT); dividends (Form 1099-DIV); and rents, profits, or other gains (Form 1099-MISC).
- Currently, the Internal Revenue Code does not specify that two or more notices of incorrect TIN relating to the same payee and the same year but received in different calendar years count as one notice. Therefore, credit unions must send a first notice to the member after receipt of the first notice of incorrect TIN and a second notice after receipt of the second notice, even if the second notice relates to information for the same year as the first notice.
- Under the proposal, when a credit union receives two or more notices of incorrect TIN with respect to the same member's account for the same year, the credit union is treated as receiving one notice, regardless of the calendar year in which the notices are received. This means that if the credit union receives a notice regarding a member in one year and the following year receives a penalty notice with respect to the same payee and the same year as the original notice, the credit union is not required to make an annual solicitation for the member's TIN, as long as the credit union already sent the required B notice.
- Comments are due to the IRS by October 1, 2002. Responses can be sent directly to the IRS at: CC:ITA:RU (REG-116644-01), Room 5226, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Comments may also be sent electronically via the IRS Internet site at www.irs.gov/regs. Please send your comments to CUNA by September 20, 2002. Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Associate General Counsel Mary Dunn at firstname.lastname@example.org or to Senior Regulatory Counsel Catherine Orr at email@example.com; or mail them to Mary or Catherine in c/o CUNA's Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, 6th Floor - South Building, Washington, DC 20004. You can obtain a copy of the proposed regulation at the above IRS Internet site or on CUNAs website. You may also contact us if you could like a copy of the proposed regulation.
QUESTIONS ABOUT THE PROPOSAL
- Would the changes in this proposed regulation significantly reduce the IRS information
reporting burden on your credit union?
Yes ______ No ______
If yes, please quantify the reduction in regulatory burden.
- Are there any other issues you feel should be addressed concerning receipt of
multiple notices with respect to incorrect taxpayer identification numbers?
Yes ______ No ______
If so, please elaborate.
- Other comments?
Eric Richard General Counsel (202) 508-6742 firstname.lastname@example.org |
Mary Mitchell Dunn SVP & Associate General Counsel (202) 508-6736 email@example.com
Jeffrey Bloch Assistant General Counsel (202) 508-6732 firstname.lastname@example.org
Catherine Orr Senior Regulatory Counsel (202) 508-6743 email@example.com