You can use form W9 (or a substitute) to request the correct name of the payee and his Taxpayer Identification Number.

You need to initiate a 28% backup withholding when a payee:

  • fails to furnish his or her Tax Identification Number (TIN)
  • provided an incorrect TIN and the IRS notifies you to impose backup withholding (notices CP2100 or CP2100A).
  • fails to certify that (s)he is not subject to backup withholding for interest and dividend accounts.
  • is a nonresident alien subject to backup withholding unless you have a signed Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, on file for him or her).

You will report backup withholding on 1099 misc and form 945 ( Annual return of withheld federal income Tax).

The payer can be held liable if s(he) did not withhold the required amount. Attention to the Trust Fund Recovery Penalty.

I created this blog to help understand certain basic aspects of U.S. tax law. Of course, each situation is unique and nothing that is on this site will ever replace the expert advice of a tax professional.

Please do not hesitate to contact me should you have any question