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In the IRS’s own words · not reviewed by VALID
CP543 notice explained, in the IRS’s own words
This notice informs you that you must begin backup withholding (BWH) interest or dividend income for the payees (taxpayers) listed on your notice. The taxpayers listed on your notice owe money to the IRS. As a payer, you can withhold some of their income to pay off their balance.
Read the full CP543 page on irs.gov ↗
What this notice is about
This notice informs you that you must begin backup withholding (BWH) interest or dividend income for the payees (taxpayers) listed on your notice. The taxpayers listed on your notice owe money to the IRS. As a payer, you can withhold some of their income to pay off their balance.
What you need to do
- Start BWH at a rate of 28% for dividends, patronage dividends and interest payments you make to the taxpayers listed on your notice.
- You must begin BWH within 30 days of your notice date.
- Continue until we tell you in writing to stop.
- Failure to do so may result in a tax liability and criminal or civil penalties.
- Report your withholding on Form 945, Annual Return of Withheld Federal Income Tax.
- Protect the payee's (taxpayer's) information or you could be subject to civil damages for unauthorized disclosure (Internal Revenue Code Section 7431).
You may want to
- Read about BWH.
- Review Publication 1335, Underreporter Backup Withholding Questions and Answers PDF.
- View your payoff amount, payment history, or order transcripts using the Tax Account tool.
- Review Internal Revenue Code (IRC) sections relative to BWH:
- IRC Sections 3403,6651,6656,7201,7202, and 7203.
What is BWH?
This is when we instruct the payers of certain types of income (mostly interest and dividends) to withhold a percentage of tax from future payments.
What is the BWH rate?
The current rate is 28% and can increase or decrease with the tax laws.
How long will the payers continue BWH?
The payers should continue until we tell them to stop or until the payee shows you written certification from us that the payee isn’t subject to BWH anymore.
What to do next
- Write down the date on the letter today.
- Look the number up on irs.gov yourself. Don’t trust a link or phone number from anyone else.
- If it says you owe money or proposes changes to your return, take it to a licensed CPA, EA or tax attorney before that date.
Not advice. Not a filing. Verify with a licensed professional. Rules change by year and facts.