Since you marked her as being a foreign partner, the IRS has a requirement that any income earned by the foreign partner should have a withholding tax.
Based upon what you have described above, your wife is not a foreign person as she resides within the United States and has a Social Security number. You can reply to this notice by writing "not liable" on the notice and sending the notice back to the address at the top of the notice.
Please see this link from the IRS for additional information.
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