26.10 Backup Withholding
Backup withholding is designed to pressure taxpayers to report interest and dividend income. You may be subject to backup withholding if you do not give your taxpayer identification number to parties paying you interest or dividend income, you give an incorrect number, or you ignore IRS notices stating that you have underreported interest or dividends. Your taxpayer identification number generally is your Social Security number or your employer identification number. The backup withholding rate is 28%.
Backup withholding will apply to fees of $600 or more (Form 1099-MISC) for work you do as an independent contractor, payments from brokers (Form 1099-B), royalty payments (Form 1099-MISC), and certain gambling winnings (26.8) if you do not give the payer your taxpayer identification number.
Civil and criminal penalties can be imposed if you provide false information to avoid backup withholding.
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