Backup withholding, also known as backup tax withholding, is a federal requirement applied to payments made to independent contractors when their taxpayer identification number (TIN) is missing or incorrect. This withholding ensures income taxes are collected on these payments. It is required when a contractor?s TIN is not provided at the time of payment or in specific cases involving CP-2100 notices. If a contractor does not respond to a CP-2100 letter within 30 days, backup withholding must be applied to future payments. This withholding is reported on forms like the 1099-NEC or 1099-MISC. Despite its importance, the Treasury Inspector General has found that backup withholding errors occur over 400,000 times annually, highlighting significant compliance issues.