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20.1.10.10
(01-01-2006)
IRC section 6705 Failure by broker to provide notice to payers
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IRC section 6705 provides
a $500 penalty for the failure by a broker to provide notice to payers that
a payee is subject to backup withholding.
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Under IRC section 3406(d)(2)(B)
, Broker notifies payor, a broker who acquires a readily tradable
instrument for a payee (customer) must notify the payor of such instrument
within 15 days of the acquisition that the payee is subject to backup withholding
if any of the following conditions exist:
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The payee fails to furnish the TIN to the broker,
or
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The IRS notifies the broker that the TIN is incorrect
, or
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The payee has not provided the broker with a certification
that the payee is not subject to backup withholding, or
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The IRS notified the broker before the acquisition
that the payee is subject to backup withholding.
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Any broker who intentionally fails to provide
the required notice is subject to the penalty of $500 for each such failure.
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