What is "Backup Withholding"?

Question

Im being asked:

Are you subject to Backup Withholding?

I dont know what to answer

Answer 1

Backup withholding is required when the IRS notifies an individual or company that they are subject to it.

Usually occurs when you have not paid your taxes and ticked the IRS off.

If you were subject to backup withholding, you would have received a letter from the IRS telling you that you are subject.

No letter = exempt.

Apparently you are being paid as an independent contractor and not an employee.

Answer 2

Backup Withholding

Answer 3

If you don't know, then it's a virtual certainty that you are not.

If a taxpayer fails to claim certain types of dividend and interest income on their tax return(s) the IRS may notify them that they are subject to backup withholding. If you never received such a letter from the IRS, you are NOT subject to backup withholding.

There's another situation where you could be subject to backup withholding. If you are self-employed and a business that you provided services for requests your SSN or TIN via Form W-9 and you fail to give them your SSN or TIN they cannot pay you unless they withhold tax at 28% of the gross payments to you. That is also referred to as backup withholding. (It should be obvious that getting credit for that backup withholding is tricky since they don't have your SSN. The processing of your tax return would be delayed while the IRS verified that it was actually you that the taxes were withheld for.)

Answer 4

Persons making certain payments to you must under certain conditions withhold and pay to the IRS 28% of such payments. This is called “backup withholding.” Payments that may be subject to backup withholding include interest, tax-exempt interest, dividends, broker and barter exchange transactions, rents, royalties, nonemployee pay, payments made in settlement of payment card and third party network transactions, and certain payments from fishing boat operators. Real estate transactions are not subject to backup withholding.

You will not be subject to backup withholding on payments you receive if you give the requester your correct TIN, make the proper certifications, and report all your taxable interest and dividends on your tax return.

Payments you receive will be subject to backup withholding if:

1. You do not furnish your TIN to the requester,

2. You do not certify your TIN when required

3. The IRS tells the requester that you furnished an incorrect TIN,

4. The IRS tells you that you are subject to backup withholding because you did not report all your interest and dividends on your tax return (for reportable interest and dividends only), or

5. You do not certify to the requester that you are not subject to backup withholding under 4 above (for reportable interest and dividend accounts opened after 1983 only).

Answer 5

This Site Might Help You.

RE:
What is "Backup Withholding"?
Im being asked:

Are you subject to Backup Withholding?

I dont know what to answer

Answer 6

Probably NO..

Unless you have other income for which no withholding is captured (say for a part time job) or a history of underpaying (underwitholding by overclaiming exemptions), you have nothing to worry about..

ED

Answer 7

An IRS procedure designed to ensure that a taxpayer who does not have a Social Security number or tax identification number will still have taxes withheld on his/her income.

Hope that helps.

Answer 8

Probably your answer is NO, unless you have a history of unpaid back taxes. (like I do )

Answer 9

Thankyou all for your replies and opinions.