Home › IRS notices › CP546 notice
CP546 notice: what it means and what to do
Got an IRS CP546 notice? Here is what it means, your deadline, what to check before you answer, and how to reply. Check your own letter free: it stays on your phone.
Check my CP546 notice freeWhat the IRS says this notice is about
This notice provides a payer, upon request, with a list of payees currently subject to backup withholding due to underreporting.
What you need to do
Protect payee (taxpayer) information or you could be subject to civil damages for unauthorized disclosure (Internal Revenue Code section 7431).
Your deadline
Answer by the date printed on your notice. If there is no date, answer as soon as you can, and call the number on the notice if you need more time.
What to check before you answer
Stock, fund or crypto sales: check your cost basis
You owe tax on the gain, the sale price minus what you paid, not on the full sale price. If the notice counts the full sale price as income, send your broker statements that show what you paid. This often lowers the amount a lot.
Payment app income (Form 1099-K): check personal payments
Money from friends and family, reimbursements, and personal items sold for less than you paid are not taxable income. If the notice counts them, list them and send your records.
Retirement distribution (Form 1099-R): was it rolled over?
Money moved into another retirement account within 60 days is generally not taxable. If that is your case, send the statement that shows it.
Self-employment income (Form 1099-NEC or 1099-MISC): count your expenses
If this was business income, your business expenses lower the taxable amount. Send a Schedule C with your expenses and keep your receipts.
State tax refund (Form 1099-G)
A state tax refund is generally taxable only if you itemized deductions the year before. If you took the standard deduction, say so in your answer.
You can agree with some items and not others
The response form lets you agree with part of the changes. Explain each item you disagree with and attach a document for each one.
Is this letter really from the IRS?
The IRS writes first by mail. A real letter shows a notice or letter number, your name and part of your tax ID number. The IRS does not ask for payment by gift card, crypto or wire transfer. If in doubt, sign in to your IRS online account, where many notices are listed.
You may want to
- Read about backup withholding .
- Review Publication 1335, Backup Withholding Questions and Answers PDF .
- Use IRS Online Account to check your payoff amount, payment history, or to view transcripts.
- Review Internal Revenue Code (IRC) sections relative to backup withholding. IRC Sections 3403, 6651, 6656, 7201, 7202, and 7203.
Common questions
What is backup withholding? (updated Mar. 25, 2026)
It’s a withholding (deduction) from certain payments (mostly interest and dividends) that payers must take when instructed by us.
What is the backup withholding rate? (updated Mar. 25, 2026)
Currently, it’s 24%. It can increase or decrease with tax laws.
How long will the payer continue backup withholding? (updated Mar. 25, 2026)
Until we instruct them to stop, or until the payee provides written certification from us that they’re no longer subject to backup withholding.
Get my response letter for CP546 notice