Letter 99-C: IRS-CAWR "Letter of Employment Tax Problem": your 94X totals do not match the W-2s, 1099-Rs or W-2Gs

What Letter 99-C is

The opening letter of IRS-CAWR, the tax side of the program (IRM 4.19.4.3.48(4), June 11, 2025). It compares "the employer's data provided to the IRS on Forms 941, 943, 944, 945 or Schedule H to the data provided to SSA on Forms W-2/W-2-C and/or to the IRS on Forms 1099-R and W-2-G" on four fields: Social Security wages, Social Security tips, Medicare wages and tips, and federal income tax withheld (IRM 4.19.4.11(2), 4.19.4.1.8(2)). Tax year 2023 letters were mailed from April through December 15, 2025 (IRM 4.19.4.10(4)). A Form 945 filer gets it when 1099-R or W-2G withholding does not tie to the return, or when 1099-R withholding was put on the backup-withholding line (IRM 4.19.4.3.32, 4.19.4.3.33).

The deadline

The manual states no reply window for Letter 99-C; the 45 days on Letter 98-C is the working assumption. No-reply cases are auto-assessed on the last quarter of the year (IRM 4.19.4.4).

What to do

Decide which side is right before writing. If the 941s were overstated, file 941-Xs with an authorized original signature; if the W-2s were low, file W-2Cs, because the IRS will not reduce the account below the W-2 totals (IRM 4.19.4.3.4(6)). For a 1099-R case, supply the plan administrator's EIN if withholding was deposited under it, or a Form 945-X moving line 2 amounts to line 1. Send third-party payment proof as the cancelled check, front and back (IRM 4.19.4.3(11)). Undeliverable letters are assessed with a 15 percent deposit penalty, so keep Form 8822-B current (IRM 4.19.4.7.4(4) Note).

The IRS side of CAWR

Letter 99-C comes from the second reconciliation, run by the IRS itself. It compares four fields across the employer's returns and the forms behind them: Social Security wages, Social Security tips, Medicare wages and tips, and federal income tax withheld, as reported on Forms 941, 943, 944, 945 or Schedule H against the totals on Forms W-2 and W-2c (from SSA) and Forms 1099-R and W-2G (from the IRS). Where the returns show less than the forms, the IRS proposes additional tax; where they show more, there may be an overpayment or missing forms. For a Form 945 filer the case is almost always about withholding: 1099-R or W-2G withholding that was deposited and reported under a different EIN (a plan trustee's or a payroll provider's), reported on Form 941 instead of 945, or entered on the backup withholding line of the 945 when it belonged on the federal income tax withheld line. The letter is titled a Letter of Employment Tax Problem and a case with no reply is assessed automatically late in the year.

Working out which side is right

Before writing, reconcile the four fields yourself from source records, because the reply depends on which set of figures was wrong. If the returns overstated, file 941-Xs or a Form 945-X with an authorized original signature and explain the correction. If the W-2s or 1099-Rs understated, file W-2cs or corrected 1099-Rs, because the IRS will not reduce the account below the totals on the forms. If the withholding was deposited under another EIN, supply that EIN and the deposit records so the credit can be moved rather than the tax assessed. If 1099-R withholding landed on the wrong line of the 945, a 945-X moving the amount between lines resolves it. Third-party payments should be proven with the cancelled check, front and back, or the EFTPS record. Keep the address of record current with Form 8822-B while the case is open, because an undeliverable 99-C is assessed with an added deposit penalty. The Form 945 withholding checker runs the same four-field comparison the unit does, the Form 945-X page covers the line correction, and the CAWR guide and reply template cover the letter.

Questions about Letter 99-C

Have a different notice? The IRS notice decoder lists all 77 in the order they tend to arrive.