Overview
Backup Withholding is a program instituted by the Internal Revenue Service (IRS) where funds are withheld from a merchant as a result of failing to provide correct taxpayer information to their payment card processor.
Internal Revenue Code Section 6050W requires reporting entities, such as payment card processors, to perform backup withholding if the Tax Filing Name and/or Tax ID fields in CoPilot do not match IRS tax record information.
If backup withholding is required, the federal income tax amount, 24% of daily gross reportable sales, must be withheld from merchant funding. Additional funds may be withheld if state backup withholding is necessary.
If merchant account information is not correct, a merchant will receive their First B-Notice. If this problem persists, a Second B-Notice will be sent. As the issue continues, restrictions increase on how the merchant account information can be changed.
Verifying Tax and Backup Withholding Information
Backup Withholdings occur when the legal information provided in CoPilot does not match the Internal Revenue Service's (IRS) records. These discrepancies can occur either during the onboarding of the merchant or by editing merchant bank, legal, and/or tax information within CoPilot.
In CoPilot, a merchant's current IRS Tax ID Verification status can be found on the merchant's Account Detail page under the Legal Information section.
An account that may incur backup withholding will be listed as Invalid under the IRS Tax ID Verification field under Account Details in CoPilot. However, backup withholdings can still be placed on accounts listed as Valid.
To verify whether an account is incurring a backup withholding, click on View Details button to open a modal displaying the following information:
| Field | Description |
| IRS Tax ID Verification |
|
| IRS Tax ID Verification Date | The date on which the tax information was verified. |
| Communication ID | The Communication ID that was provided on the solicitation letter and the First B-Notice. |
| BUW Required | Indicates whether backup withholding is required. |
| BUW Effective Date | The date on which backup withholding starts. |
| BUW Stop Date | The date on which backup withholding stops. |
| BUW Notice | Indicates whether first or second notice was sent. |
| BUW Notice Date | When the Fiserv team sent out the B-Notices. |
| BUW Reson Code | The descriptor code associated with backup withholding. |
| BUW Return Mail | Indicates if IRS related notices were returned. |
| BUW Return Mail Date | The date on which the return mail was recieved |
| Merchant Response | Most recent action taken by the merchant related to IRS verification. |
| Merchant Response Date | The date of the merchant's most recent action related to IRS verification. |
Preventing Backup Withholding on an Account with an Invalid TIN
To prevent backup withholding on an account, the associated legal information must be correct. Ensure the tax information for the account reflects the exact values used to file IRS tax returns.
If a correction is needed, depending on where you or the merchant is in the backup withholding process you may use one of the following methods to make the update:
Before Being Placed on Backup Withholding
If the account has not yet been placed on backup withholding, one of the following methods can be followed:
Updating via CoPilot Ticket
A Legal Update ticket can be submitted in CoPilot at any time before a backup withholding is placed on the account. The ticket must contain the Legal Change Form as well as supporting documentation such as a W9, SS4, 147C, or most recent Tax Return.
The Legal Name and Tax ID: IRS Change Request document can be found here.
Updating via BusinessTrack
Merchants with accounts that have an invalid IRS TIN Validation Status may correct their tax information using the Tax Information Update section on the Business Track website. Use the Communication ID to access the site. All required fields must be completed including the reason for the tax update. If a filing status or ownership change is selected, a 1099-K will be created for each entity using the Effective Change Date to report sales.
Form SS-4 cannot be used to correct tax information and resolve a merchant’s backup withholding status.
Please allow 48 hours for processing.
Before Recieveing First B-Notice
If the account was placed on backup withholding but a First B-Notice was not yet received, one of the following methods can be followed:
Updating via BusinessTrack
Merchants with accounts that have an invalid IRS TIN Validation Status may correct their tax information using the Tax Information Update section on the Business Track website. Use the Communication ID to access the site. All required fields must be completed including the reason for the tax update. If a filing status or ownership change is selected, a 1099-K will be created for each entity using the Effective Change Date to report sales.
Form SS-4 cannot be used to correct tax information and resolve a merchant’s backup withholding status.
After Recieving First B-Notice
If the First B-Notice was received, one of the following methods can be followed:
Updating via BusinessTrack
Merchants with accounts that have an invalid IRS TIN Validation Status may correct their tax information using the Tax Information Update section on the Business Track website. Use the Communication ID to access the site. All required fields must be completed including the reason for the tax update. If a filing status or ownership change is selected, a 1099-K will be created for each entity using the Effective Change Date to report sales.
The merchant will be prompted to complete an electronic Form W-9 or Form W-8 when accessing the Business Track website.
Form SS-4 cannot be used to correct tax information and resolve a merchant’s backup withholding status.
Please allow 48 hours for processing.
Updating via Mail
If the Substitute Form W-9 provided in the First B-Notice or the Cover Letter provided in the Second B-Notice is not used, the merchant account number(s) must be included on the submitted tax documentation. If the merchant account number is not visible, the tax documentation will not be processed and the Backup Withholding will remain in effect.
Form SS-4 cannot be used to correct tax information and resolve a merchant’s backup withholding status.
To update the merchant account information by mail after receiving the First B-Notice, the merchant must write their merchant account number on the bottom left side of the W9 form and mail it to:
First Data Reporting Services LLC
PO Box 6604
Hagerstown, MD 21741-6604
Allow 7 to 10 business days for mail delivery and processing.
Updating via Fax
If the Substitute Form W-9 provided in the First B-Notice is not used, the merchant account number(s) must be included on the submitted tax documentation. If the merchant account number is not visible, the tax documentation will not be processed and the Backup Withholding will remain in effect.
Form SS-4 cannot be used to correct tax information and resolve a merchant’s backup withholding status.
After receiving the First B-Notice, merchants can fax their changes to the number: +402-934-4548.
Your merchant account number must be entered on the bottom left side of the W-9 form.
Allow 3 to 5 business days for processing.
After Receiving Second B-Notice
If the Second B-Notice was received, one of the following methods can be followed:
Updating via BusinessTrack
If the Substitute Form W-9 provided in the First B-Notice or the Cover Letter provided in the Second B-Notice is not used, the merchant account number(s) must be included on the submitted tax documentation. If the merchant account number is not visible, the tax documentation will not be processed and the Backup Withholding will remain in effect.
The merchant cannot submit tax documentation through this website after receiving the Second B-Notice.
Use the Communication ID to access the site. All required fields must be completed including the reason for the tax update. If a filing status or ownership change is selected, a 1099-K will be created for each entity using the Effective Change Date to report sales.
The merchant will be prompted to complete an electronic Form W-9 or Form W-8 when accessing the Business Track website.
Form SS-4 cannot be used to correct tax information and resolve a merchant’s backup withholding status.
For both of the above solutions, please allow 48 hours for processing.
Updating via Mail
If the Substitute Form W-9 provided in the First B-Notice or the Cover Letter provided in the Second B-Notice is not used, the merchant account number(s) must be included on the submitted tax documentation. If the merchant account number is not visible, the tax documentation will not be processed and the Backup Withholding will remain in effect.
Form SS-4 cannot be used to correct tax information and resolve a merchant’s backup withholding status.
To update the merchant account information by mail after receiving the Second B-Notice, the merchant must mail a 147c form to the address below. If they are a sole proprietor, they may instead mail a copy of their Social Security Card.
For both of these options, they must include their merchant account number written on an included cover sheet.
First Data Reporting Services LLC
PO Box 6604
Hagerstown, MD 21741-6604
Allow 7 to 10 business days for mail delivery and processing.
Updating via Fax
If the Substitute Form W-9 provided in the First B-Notice or the Cover Letter provided in the Second B-Notice is not used, the merchant account number(s) must be included on the submitted tax documentation. If the merchant account number is not visible, the tax documentation will not be processed and the Backup Withholding will remain in effect.
The SS4 is not an accepted tax document to stop Backup Withholdings.
After receiving the Second B-Notice, a 147c EIN Validation form must be faxed to the number: +402-934-4548. For sole proprietors, the Social Security Card may be faxed instead.
Your merchant account number must be present on the cover sheet.
Allow 3 to 5 business days for processing.