Taxpayers who receive certain types of income may need to have backup withholding taken from their payments. Backup withholding can apply to most payments reported on Forms 1099 and W-2G
Below are some facts to help you understand backup withholding and determine if you should have it withheld from your income payments.
What is backup withholding?
The person or business paying you doesn’t generally withhold taxes from certain payments. They don’t do this because it’s assumed that you (the taxpayer) will report and pay taxes on this income when you file your federal tax return. There are, however, situations when the person or business paying you is required to withhold a certain percentage of tax to make sure that the IRS receives the tax due on this income. This is known as backup withholding.
What percentage is backup withholding set at?
The current percentage is 24 percent.
What payments are subject to backup withholding?
Why might the person or business paying me need to take out back up withholding?