Walter Johnson has two accounts at First National Bank. His savings account was opened in 1975, and his money market savings account was opened in 1985.He has never supplied a TIN number to the bank. What must First National Bank do?

For interest-bearing accounts opened before 1984 ("pre-1984 accounts") for which the bank has never received a Taxpayer Identification Number (TIN), the bank has specific obligations. The bank must commence backup withholding on all reportable payments (interest). The withholding rate was 28% for a period and is currently 24%. Concurrently, the bank must exercise due diligence by making an annual solicitation for the TIN until it is provided. Therefore, the bank must both withhold on payments and continue to annually request the TIN for these accounts.

A. This is incomplete. The bank is required to not only withhold but also to continue annual solicitations for the TIN as part of its due diligence.
C. This is incomplete. The bank must also begin backup withholding on all reportable payments in addition to making annual TIN solicitations.
D. While a bank must obtain a TIN for new accounts, this action does not resolve the compliance issue with the existing pre-1984 accounts.

1. Code of Federal Regulations. 26 C.F.R. § 31.3406(d)-1(a). This regulation states that a payor must withhold on a pre-1984 account or instrument if the payee has not provided a TIN.

2. Code of Federal Regulations. 26 C.F.R. § 31.3406(d)-5(b)(2). This section outlines the requirement for a payor to make annual solicitations for a TIN on pre-1984 accounts where the TIN is missing.

3. Internal Revenue Service. (2024). Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s). Section 3, "When To Start and Stop Backup Withholding," p. 7.