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Publication 505

Backup Withholding(p15)

Banks or other businesses that pay you certain kinds of income must file an information return (Form 1099) with the IRS. The information return shows how much you were paid during the year. It also includes your name and taxpayer identification number (TIN). TINs are explained later in this discussion.
These payments generally are not subject to withholding. However, "backup" withholding is required in certain situations.

Payments subject to backup withholding.(p15)

Backup withholding can apply to most kinds of payments that are reported on Form 1099. These include: Backup withholding also may apply to gambling winnings. See Backup withholding on gambling winnings under Gambling Winnings on page 15.

Payments not subject to backup withholding.(p16)

Backup withholding does not apply to payments reported on Form 1099-MISC (other than payments by fishing boat operators and royalty payments) unless at least one of the following three situations applies.
Form 1099 and backup withholding are generally not required for a payment of less than $10.

Withholding rules.(p16)

When you open a new account, make an investment, or begin to receive payments reported on Form 1099, the bank or other business will give you Form W-9, Request for Taxpayer Identification Number and Certification, or a similar form. You must enter your TIN on the form and, if your account or investment will earn interest or dividends, you also must certify (under penalties of perjury) that your TIN is correct and that you are not subject to backup withholding.
The payer must withhold at a flat 28% rate in the following situations.
Taxpayer identification number.(p16)
Your TIN is one of the following three numbers.
An ITIN is for tax use only. It does not entitle you to social security benefits or change your employment or immigration status under U.S. law. For more information on ITINs, get Publication 1915, Understanding Your IRS Individual Taxpayer Identification Number.

How to prevent or stop backup withholding.(p16)

If you have been notified by a payer that the TIN you gave is incorrect, you usually can prevent backup withholding from starting or stop backup withholding once it has begun by giving the payer your correct name and TIN. You must certify that the TIN you give is correct.
However, the payer will provide additional instructions if the TIN you gave needs to be validated by the Social Security Administration or by the IRS. This may happen if both the following conditions exist.
  1. The IRS notifies the payer twice within 3 calendar years that a TIN you gave for the same account is incorrect.
  2. The incorrect TIN is still being used on the account when the payer receives the second notice.
Underreported interest or dividends.(p16)
If you have been notified that you underreported interest or dividends, you must request and receive a determination from the IRS to prevent backup withholding from starting or to stop backup withholding once it has begun. Your request must show that at least one of the following situations applies.
If the IRS determines that backup withholding should stop, it will provide you with certification and will notify the payers who were sent notices earlier.


There are civil and criminal penalties for giving false information to avoid backup withholding. The civil penalty is $500. The criminal penalty, upon conviction, is a fine of up to $1,000 or imprisonment of up to 1 year, or both.