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

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           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.

 

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