CO-105: Tax Withholding Amount

What Does CO-105 Mean?

CO-105 may appear when the tax withholding is structured as a contractual provision — for example, when the provider's contract includes specific tax withholding terms or when the payer processes the withholding through their contractual adjustment system. The practical impact is the same as OA-105: the funds are withheld for tax purposes and remitted to the IRS.

When CARC 105 appears on your remittance, the payer is deducting a portion of your payment for federal tax withholding. In most cases, this happens because the IRS has flagged your Tax Identification Number (TIN) as missing, incorrect, or mismatched, triggering mandatory backup withholding at the current IRS rate (typically 24%). The payer is legally obligated to withhold this amount and remit it to the IRS until the TIN discrepancy is resolved.

The most common scenario starts with an IRS B-notice. The IRS identifies a mismatch between the TIN the payer reported on 1099s and the IRS's records. The IRS then notifies the payer (via a B-1 or B-2 notice) to begin backup withholding on all future payments to that provider until a corrected W-9 is received and validated. This can also be triggered when a provider changes their legal entity structure, name, or TIN but fails to update the payer — creating a mismatch between the provider's current tax records and what the payer has on file.

CARC 105 has a compounding financial impact if not addressed quickly. Every payment processed while the TIN issue remains unresolved will have the backup withholding percentage deducted. The withheld amounts are recoverable through the provider's annual tax return as tax payments already made, but that creates a cash flow gap that can last months. The fastest resolution is to submit a corrected W-9 directly to the payer's provider enrollment department and confirm they update their records. Once the TIN is corrected, the payer should stop withholding on subsequent payments.

How to Resolve

Submit a corrected W-9 to the payer immediately, confirm the TIN update, and track previously withheld amounts for recovery through your tax return.

1. Verify tax withholding terms in your contract Review your provider contract to understand if tax withholding is handled as a contractual provision and whether specific terms apply.
2. Submit corrected W-9 Provide updated tax documentation to the payer's provider enrollment and contracts departments to resolve the TIN issue.
3. Request refund of excess withholding If the contractual withholding exceeds what is required by the IRS, contact the payer to request a refund of the excess amount.

How to Prevent CO-105

• Review tax withholding provisions in provider contracts during negotiations
• Ensure tax documentation is included in the credentialing and re-credentialing process with each payer
• Monitor remittances for unexpected CO-105 adjustments and investigate immediately

Also Filed As

The same CARC 105 may appear with different Group Codes:

Related Denial Codes