Thursday, June 16, 2022

Tax Tip 2022-93: Fast facts to helps taxpayers understand backup withholding

Bookmark and Share

IRS.gov Banner
IRS Tax Tips June 16, 2022

Useful Links:

IRS.gov

Help For Hurricane Victims


News Essentials

What's Hot

News Releases

IRS - The Basics

IRS Guidance

Media Contacts

Facts & Figures

Around The Nation

e-News Subscriptions


The Newsroom Topics

Multimedia Center

Noticias en Español

Radio PSAs

Tax Scams/Consumer Alerts

The Tax Gap

Fact Sheets

IRS Tax Tips

Armed Forces

Latest News


IRS Resources

Compliance & Enforcement News

Contact Your Local IRS Office

Filing Your Taxes

Forms & Instructions

Frequently Asked Questions

Taxpayer Advocate Service

Where to File

IRS Social Media

 


Issue Number:  Tax Tip 2022-93

___________________________________________________________

Fast facts to helps taxpayers understand backup withholding


Under the tax law, payers responsible for knowing who they are paying. To accomplish this, payers are required to collect the legal name and taxpayer identification number, or TIN, from vendors they pay. Generally, backup withholding is required when a service vendor does not provide the payer their TIN timely or accurately. This type of withholding can apply to most payments reported on certain Forms 1099 and W-2G.

Here's what taxpayers need to know about backup withholding.

Backup withholding is required on certain non-payroll amounts when certain conditions apply.

The payer making such payments to the payee doesn't generally withhold taxes, and the payees report and pay taxes on this income when they file their federal tax returns. There are, however, situations when the payer is required to withhold a certain percentage of tax to make sure the IRS receives the tax due on this income.

Backup withholding is set at a specific percentage.

The current rate is 24 percent.

Payments subject to backup withholding include:
  • Interest payments
  • Dividends
  • Payment card and third-party network transactions
  • Patronage dividends, but only if at least half the payment is in money
  • Rents, profits, or other gains
  • Commissions, fees, or other payments for work done as an independent contractor
  • Payments by brokers
  • Barter exchanges
  • Payments by fishing boat operators, but only the part that is paid in actual money and that represents a share of the proceeds of the catch
  • Royalty payments
  • Gambling winnings, if not subject to gambling withholding
  • Taxable grants
  • Agriculture payments

Examples when the payer must deduct backup withholding:

  • If a payee has not provided the payer a Taxpayer Identification Number.
    • A TIN specifically identifies the payee.
    • TINs include Social Security numbers, Employer Identification Numbers, Individual Taxpayer Identification Numbers and Adoption Taxpayer Identification Numbers.
  • If the IRS notified the payer that the payee provided an incorrect TIN; that is the TIN does not match the name in IRS records. Payees should make sure that the payer has their correct name and TIN to avoid backup withholding.

More information:
Backup Withholding "B" Program
Publication 1281, Backup Withholding for Missing and Incorrect Name/TINs

Share this tip on social media -- #IRSTaxTip: Fast facts to helps taxpayers understand backup withholding https://go.usa.gov/xJEbD

 

Back to top

 


FaceBook Logo  YouTube Logo  Instagram Logo  Twitter Logo  LinkedIn Logo


Thank you for subscribing to IRS Tax Tips, an IRS e-mail service. For more information on federal taxes please visit IRS.gov.

This message was distributed automatically from the IRS Tax Tips mailing list. Please Do Not Reply To This Message.

 


This email was sent to baltimoreonlinebusiness.thebest@blogger.com by: Internal Revenue Service (IRS) · Internal Revenue Service · 1111 Constitution Ave. N.W. · Washington DC 20535 GovDelivery logo

No comments:

Post a Comment