Backup Withholding, The Forgotten Piece of the 1099 World

Erica Hall21 Aug, 2024Education

Backup withholding mandates that a payer withhold tax from payments that are not otherwise subject to withholding. This requirement arises if you do not provide correct taxpayer identification number (TIN) or fail to report income such as interest, dividends, or patronage dividends. Banks and other businesses making these payments are required to file an information return with the IRS using Form 1099. This form will list your name and TIN?such as a Social Security number (SSN), Employer Identification Number (EIN), or Individual Taxpayer Identification Number (ITIN)?and will indicate any amounts withheld under backup withholding rules. In addition to reporting income and withheld amounts, Form 1099 helps ensure tax compliance and accurate income reporting.