What Is a 972-CG Notice, and How Can You Avoid It?
For health insurance payers, compliance with IRS regulations is a critical yet complex part of day-to-day operations. Receiving a 972-CG notice can be daunting, as it signals potential penalties for errors or delays in information return filings like 1099s. These fines can strain budgets and increase administrative burdens, making it vital for payers to understand the 972-CG notice and how to address or avoid it effectively.
What Is a 972-CG Notice?
A 972-CG is an IRS notification proposing penalties under IRC Section 6721 for errors in annual information returns. Health insurance payers often face these penalties for submitting incorrect or incomplete information, such as Taxpayer Identification Number (TIN) or Legal Name mismatches.
This notice is especially relevant to health insurance payers managing large volumes of provider, contractor, or vendor payments. Errors in 1099 filings for these payees can trigger penalties, adding financial and operational strain.
How Does the 972-CG Process Work?
The 972-CG notice typically follows a prior warning, such as the CP2100 Report, which notifies payers of errors like mismatched TINs and Legal Names in their submitted 1099s. If the issues flagged in the CP2100 Report are not addressed, or if corrective actions (like requesting updated W-9 forms and issuing B Notices) are insufficient, the IRS may issue a 972-CG with proposed penalties.
The notice includes a breakdown of the errors, the number of affected returns, and the calculated fines. However, payers have an opportunity to request penalty abatement by providing evidence that the mistakes occurred due to reasonable cause rather than willful neglect. Examples of reasonable cause may include relying on incorrect payee information or delays caused by circumstances beyond the payer’s control.
Why Are Health Insurance Payers Vulnerable?
Health insurance payers often work with a vast network of providers, contractors, and vendors, increasing the likelihood of filing errors. Missing or inaccurate TINs, incomplete Legal Names, or failure to issue timely payee statements are common pitfalls. These mistakes, while often unintentional, can result in hefty fines if not addressed promptly.
Furthermore, payers must navigate strict IRS timelines. Responding to CP2100 Reports, sending updated W-9 requests, and issuing B Notices all require careful management to stay compliant and avoid penalties.
How to Avoid a 972-CG Notice
To reduce the risk of receiving a 972-CG notice, health insurance payers should:
- Validate TINs and Legal Names proactively: Use W-9 Corrections to verify payee information before filing 1099s.
- Take Action on CP2100 Reports immediately: W-9 Corrections will correct errors as soon as they are identified and document your efforts to request updated information from payees.
- Stay organized: Maintain detailed records of W-9 forms, communication with payees, and actions taken to resolve errors.
- Partner with experts: Collaborate with W-9 Corrections to streamline compliance processes and ensure accurate filings.
How We Can Help
Navigating the complexities of IRS compliance and avoiding a 972-CG notice doesn’t have to be overwhelming. W-9 Corrections specializes in healthcare data management and offers proactive solutions tailored for health insurance payers.
W-9 Corrections, a BASELoad company, helps payers validate TINs and Legal Names throughout the year, ensuring accurate filings and reducing the risk of CP2100 Reports or 972-CG notices. If a 972-CG notice is issued, we will provide expert guidance on preparing a robust response and requesting penalty abatements.
Through our W-9 Corrections service, we will contact providers for you to request any information we don’t already have in our database.
By partnering with W-9 Corrections, health insurance payers can stay compliant, avoid unnecessary penalties, and focus on delivering quality care.
To learn more about how W-9 Corrections can support your organization, contact us today at (704) 424-9889 or email us at info@w9corrections.com.