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Understanding IRS Notice 972CG & Avoiding Penalties

Receiving an IRS Notice 972CG can be a wake-up call for businesses that file 1099 forms, W-2s, and other tax documents. This notice informs taxpayers of potential penalties due to incorrect, missing, or mismatched TINs (Taxpayer Identification Numbers). If left unaddressed, these fines can accumulate quickly, impacting your bottom line.

To avoid unnecessary penalties, businesses must implement proactive TIN matching and data validation strategies. In this guide, we’ll break down what IRS Notice 972CG means, why you might receive it, and how to protect your business from costly fines.

1. What Is IRS Notice 972CG?

IRS Notice 972CG is a proposed penalty notice issued to businesses that have submitted information returns (such as 1099s or W-2s) with incorrect or missing Taxpayer Identification Numbers (TINs).

Did You Know?
If your TIN and name combinations don’t match IRS records, you could face penalties of up to $310 per incorrect return.

The notice includes:

  • A list of records with incorrect or missing TINs
  • The penalty amount calculated based on the number of errors
  • Instructions on how to respond or dispute the notice

If your business receives this notice, time is critical—you must respond within 45 days (or 60 days for foreign filers) to avoid final penalties.

2. Why Did You Receive IRS Notice 972CG?

Common reasons businesses receive IRS Notice 972CG include:

Incorrect or Missing TINs

  • The reported TIN does not match IRS records.
  • The TIN field was left blank or contained invalid characters.

Name and TIN Mismatch

  • The business or individual’s legal name does not match the provided TIN.
  • Abbreviations, spelling errors, or formatting issues caused a mismatch.

Failure to Use TIN Matching Before Filing

  • IRS TIN Matching was not performed before submitting information returns.
  • The IRS system flagged multiple errors across your filings.

Pro Tip:
Running TIN matching before filing prevents these issues and helps businesses avoid penalties.

3. How to Respond to IRS Notice 972CG

If you receive IRS Notice 972CG, follow these steps:

Step 1: Review the Notice

  • Carefully examine the list of mismatched TINs.
  • Identify where errors occurred in your records.

Step 2: Correct Any TIN Errors

  • Contact payees to request correct TIN and name information.
  • Compare records against IRS databases using a TIN matching service.

Step 3: Respond to the IRS

  • Provide corrections or reasonable cause explanations.
  • Submit a written response within 45 days (60 days for foreign filers).
  • Keep detailed records of your response for compliance tracking.

Best Practice:
If a payee refuses to provide a valid TIN, begin backup withholding (24%) to remain compliant.

4. How to Avoid IRS Notice 972CG in the Future

The best way to prevent penalties is to implement proactive TIN validation before filing.

Use a TIN Matching Service

  • Run real-time TIN/name matching to verify data before filing.
  • Reduce mismatches and incorrect submissions.

Ensure Data Accuracy

  • Double-check spelling, abbreviations, and formatting.
  • Use consistent formatting to match IRS records.

Keep an Updated Database

  • Request W-9 forms before issuing payments.
  • Regularly update and audit vendor records.

Automate Compliance with API Integration

  • Use an API-driven TIN matching solution to eliminate manual data entry.
  • Automate bulk processing for large data sets.

5. How TIN Comply Can Help You Avoid IRS Penalties

TIN Comply simplifies compliance by providing fast, reliable, and automated TIN validation. Our service helps businesses:

Match TINs against official IRS records in real-time.
Prevent penalties by reducing mismatched filings.
Automate bulk TIN matching for large data sets.
Keep audit trails for compliance reporting.
Seamlessly integrate with accounting and payroll systems via API.

Avoid the headaches of IRS penalties. Start validating TINs today!

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Start Your Free Trial Today and discover how TIN Comply transforms your compliance workflow with real-time, automated TIN matching and so much more.

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Disclaimer: This article is for informational purposes only and does not constitute legal advice. Always consult a tax or compliance professional for guidance tailored to your organization's specific needs.

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