![]() Backup withholding is usually only required if the individual still needs to provide their tax ID number or if the IRS has notified the business that the individual has not paid his taxes.Ĭertain taxpayers are not subject to backup withholding. The withheld amount is sent to the IRS along with the business’ other tax payments. When a business pays an individual for services, the business is required to withhold a certain percentage of the payment as income tax. For example, certain government entities may be subject to backup withholding, even if they are exempt from taxation. However, there are a few exceptions to this rule. Generally, backup withholding is only required on payments made to individuals, businesses, and other entities that are not exempt from taxation. For example, backup withholding may be required if a business does not withhold taxes from its employees’ paychecks. The tax is withheld from the payment and is generally used to offset any tax liability the recipient may have.īusinesses may also be subject to backup withholding if they fail to comply with certain tax requirements. What is backup withholding?īackup withholding is a tax imposed by the Internal Revenue Service (IRS) on certain payments made to individuals, businesses, and other entities. Here we provide a detailed overview of backup withholding. The amount of tax to withhold will be based on the payment amount and the applicable tax rate. The payer will generally notify you if you are required to withhold backup withholding tax from the payment. ![]() Backup withholding may also be required when taxpayers owe taxes or have outstanding debts. The withholding is typically required when the taxpayer does not provide his Social Security number or does not provide accurate information. What payments are “excluded” from backup withholding?īackup withholding is a tax that is withheld from certain payments made to taxpayers.What payments are subject to backup withholding?.
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