Backup Withholding and Form W-9: What to Know

A business that pays you may ask for Form W-9, Request for Taxpayer Identification Number and Certification. The form gives the business your correct taxpayer identification number (TIN), so it can file an information return with the IRS. IRS: About Form W-9

Your TIN can be a Social Security number (SSN), an individual taxpayer identification number (ITIN), or an employer identification number (EIN). IRS: Form W-9

Why the business asks

Banks and other businesses send a Form 1099 for many kinds of payments. The form shows your name and TIN. Common examples are interest (Form 1099-INT), dividends (Form 1099-DIV), contractor pay (Form 1099-NEC), and sales reported by a broker (Form 1099-B). IRS: Topic no. 307, Backup withholding

When you open an account or start to receive these payments, you must give your TIN. In some cases you must give it in writing and certify, under penalties of perjury, that it is correct. The business then gives you a Form W-9 or a similar form. IRS: Topic no. 307

Which forms ask for it

The business that must file the information return is the one that asks for Form W-9. The form is used for many information returns, including Form 1099-INT, Form 1099-DIV, Form 1099-MISC, Form 1099-NEC, Form 1099-B, Form 1099-S, and Form 1099-K. It is also used for Form 1098 (home mortgage interest), Form 1098-E (student loan interest), Form 1098-T (tuition), Form 1099-C (canceled debt), and Form 1099-A. IRS: Form W-9

What backup withholding is

Backup withholding is a flat 24% that the payer takes out of a payment before it reaches you. It can apply to most kinds of payments reported on Form 1099. IRS: Topic no. 307

The payer must withhold at this rate when:

• you do not give the payer your TIN in the required way;
• the IRS tells the payer that the TIN you gave is incorrect;
• the IRS tells the payer to start withholding on interest or dividends because you underreported that income. The IRS does this only after it has mailed you four notices over at least 120 days; or
• you do not certify that you are not subject to backup withholding for underreported interest and dividends, when that certification is required.

How to stop it

To stop backup withholding, fix the reason it started. That can mean giving the payer your correct name and TIN, correcting underreported income and paying what you owe, or filing a missing return.

If the payer sends you a notice that your TIN is wrong, you can often stop the withholding by giving the payer your correct name and TIN and certifying that it is correct. If you get a second notice from that payer, you need to verify your name and TIN. IRS Publication 1281 explains the steps. IRS: Publication 1281

How withholding is reported

If your Form 1099 shows an amount withheld under the backup withholding rules, report that amount as federal income tax withheld on your return for the year you received the income. Tax withheld counts toward the tax you owe. IRS: Topic no. 307

Form W-9 tips

• For an individual, the IRS says to generally enter the name shown on your tax return. IRS: Form W-9
• A foreign person does not use Form W-9. A foreign person uses the correct Form W-8 or Form 8233. IRS: Form W-9
• If you think someone else used your number, contact the IRS Identity Theft Hotline or file Form 14039. IRS: Form W-9

Check the 1099 before you file

Each Form 1099 you receive shows the payments made to you and any amount withheld under the backup withholding rules. Compare those numbers with your own records. If a number is wrong, contact the payer and ask for a corrected form. IRS: Topic no. 307

Steps to take

1. Check that the name and TIN on your Form W-9 match your tax return.
2. Keep a copy of the form you gave, with the date.
3. Review each Form 1099 for amounts withheld.
4. If you get a notice about your TIN, respond to it promptly.

General information, not advice about your return.

Sources: IRS, About Form W-9 (https://www.irs.gov/forms-pubs/about-form-w-9); IRS, Form W-9, Rev. March 2024 (https://www.irs.gov/pub/irs-pdf/fw9.pdf); IRS, Topic no. 307, Backup withholding (https://www.irs.gov/taxtopics/tc307); IRS, Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s) (https://www.irs.gov/pub/irs-pdf/p1281.pdf) This is general information, not advice about your specific return.

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