Here Comes The IRS

In June the Internal Revenue Service will send financial institutions a list of accounts on which were reported an incorrect Taxpayer Identification Number.

Although the IRS indicates that backup withholding will not have to be imposed at that time, you will, however, have to certify whether you have complied with the regulations for the accounts on the list.

If the institution has not exhibited "due diligence," there could be a penalty imposed.

Due diligence means that you:

Have used the Tax Identification Number certified by a customer on a W-9 form; or

Sent the required mailings to customers whose accounts opened before 1/1/84 if the TIN was not certified by a W-9.

This is part of what is termed the "B notice" roles, which obligate financial institutions to withhold 20% of interest when a customer provides the IRS or your institution with an incorrect taxpayer identification number.

We have already heard from banks and savings and loans who have been fined for incomplete or incorrect TIN reporting.

If you have not already checked your files, we strongly urge you to do so.

Copyright © 1990 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 1, No. 5, 5/90