When an employer pays an employee (or a company paying a dividend to a shareholder), which is the one subjected to backup witholding?
2007-03-21 09:02:40 · 3 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
The employee.
2007-03-21 18:39:07 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Backup withholding is mandatory withholding by the payor. In the case you describe, the employer would withhold taxes from the employee's pay.
More commonly a bank or investment company withhold's taxes from the earnings of an investor. The most normal situation is that the investor has not provided tax identification to the bank or investment company.
Failure to pay taxes in the past can also trigger backup withholding.
2007-03-21 11:53:09 · answer #2 · answered by ninasgramma 7 · 0⤊ 0⤋
The person receiving the money is the one subject to backup withholding. It usually means they have not paid their taxes in the past, so the IRS wants to make sure they get their money first.
2007-03-21 09:07:06 · answer #3 · answered by Brian G 6 · 0⤊ 0⤋