December 24, 1990
TO: TAX COMMITTEE NO. 36-90
OPERATIONS COMMITTEE NO. 29-90
TRANSFER AGENT ADVISORY COMMITTEE NO. 56-90
RE: TIMING OF SECOND B NOTICE AND PENALTY NOTICE MAILINGS
__________________________________________________________
At a recent meeting of the Transfer Agent Advisory
Committee, several questions arose regarding the timing of (1) a
second IRS "B Notice" mailing and (2) the mailing of penalty
notices. Subsequently, the Institute contacted the IRS on these
issues. We now understand that B Notices will be mailed in March
1991 to those payors who did not receive B Notices last fall. We
further understand that in March 1991 the IRS will send notices
to payors assessing any applicable penalties for (1) failures to
file correct taxpayer identification numbers ("TINs"), (2)
failures to file information returns and statements on magnetic
media, (3) failures to file timely information returns and
statements and (4) failures to file information returns and
statements in "processible" formats. As payors will only be
given 10 days to respond to the notices sent in March, the IRS
plans to send in February a list of all shareholder accounts for
which the IRS believes incorrect taxpayer identification numbers
have been filed.
A separate question arose at the 1990 Operations Conference
regarding whether payors may, under the existing due diligence
regulations, effectively defend against a penalty for failure to
provide correct taxpayer information if they open an account
without a certified TIN and subsequently impose backup
withholding. After discussing this issue with the conference
speaker, the speaker's comments have been clarified as follows.
Payors who receive an awaiting-TIN certification may assert the
due diligence defense by imposing backup withholding and making
required mailings if a certified TIN is not received. However,
payors who receive neither a certified TIN nor an awaiting-TIN
certification when the account is opened may not assert the due
diligence defense merely by imposing backup withholding and
making mailings.
We will keep you informed of developments.
Keith D. Lawson
Associate General Counsel