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CO-105 Denial Code: Tax Withholding

CO-105 means the payer withheld part of the payment for taxes. It often traces to a tax reporting requirement or a problem with the taxpayer identification information the payer has on file for you, and the withheld amount is not billable to the patient.

Quick facts

Code
CO-105 (CARC 105)
Status
Active In use since January 1, 1995.
Code set
Claim Adjustment Reason Codes (CARC)
Group codes
  • CO (Contractual Obligation): The tax withheld is a matter between the provider, the payer, and the taxing authority. It cannot be collected from the patient.
Official description
Tax withholding.
X12 Claim Adjustment Reason Codes, retrieved September 25, 2026
Last verified
against the official X12 list.

What CO-105 means

CARC 105 is tax withholding. The payer reduced the payment and sent the withheld portion to a taxing authority rather than to you. The patient’s balance and the payer’s adjudication of the service are not affected; only the amount deposited to your account changes.

A frequent trigger is federal backup withholding. Payers that report payments to the IRS must have a correct taxpayer identification number (TIN) and legal name for you. When the TIN and name do not match IRS records, or no valid W-9 is on file, the payer may be required to withhold a percentage of payments. Other withholding can arise from state or local rules, or from levies, depending on the situation.

Common causes

  • The legal business name on file with the payer does not match the name the IRS associates with your TIN.
  • No current W-9 on file after a change of ownership, entity type, or TIN.
  • The TIN reported in box 25 of the CMS-1500 differs from the one in the payer’s enrollment record.
  • An IRS notice instructed the payer to begin backup withholding.
  • A state or local tax requirement applies to certain payments in that jurisdiction.

How to fix it

  1. Ask the payer why tax is being withheld and which authority or notice triggered it.
  2. Check your TIN and legal name. Compare the payer’s records, your claims (box 25), and your IRS documentation.
  3. Submit a corrected W-9 or enrollment update if there is a mismatch, and ask the payer to confirm when withholding will stop.
  4. Resolve any IRS notice with your tax advisor. Payers generally cannot stop backup withholding the IRS has instructed them to apply until the IRS clears it.
  5. Post CO-105 as tax withheld, not as a write-off, so your accountant can account for it on your tax filings.

How to prevent problems with CO-105

  • Keep one consistent legal name and TIN across payer enrollments, claims, and IRS records.
  • Update W-9s with every payer after entity or ownership changes.
  • Review ERA payments for unexpected withholding each month rather than at year-end.
  • Coordinate enrollment updates with your credentialing team. See provider enrollment denials for how TIN mismatches cause other problems too.
  • Track CO-105 with an ERA Analyzer so a sudden appearance is caught right away.
  • CO-104 (Managed care withholding.): Managed care withholding, a contract-based withhold rather than a tax withhold.
  • CO-235 (Sales Tax): Sales tax adjustment on a service or item, a different tax-related code.
  • CO-137 (Regulatory Surcharges, Assessments, Allowances or Health Related Taxes.): Regulatory surcharges, assessments, or health-related taxes.
  • CO-223 (Adjustment code for mandated federal, state or local law/regulation that is not already covered by another code and is mandated before a new code…): Adjustment for mandated federal, state, or local law or regulation.

CO-105 FAQ

Why would a payer withhold tax from my claim payment?

A common reason is federal backup withholding when the payer lacks a valid taxpayer identification number and name match for you. Some jurisdictions also require withholding in specific situations.

How do I stop CO-105 withholding?

Find out what triggered it. If it is a TIN or name mismatch, send the payer a corrected W-9 matching your IRS records and ask when withholding will stop.

Can I recover the withheld tax?

Withheld federal tax is generally reported to you and the IRS and can be claimed on your tax return. Ask your accountant how to handle it.