These payments generally are not subject to withholding. However, “backup” withholding is req">
Banks or other businesses that pay you certain kinds of income must file an information return Form 1099 with the IRS. The information return shows how much you were paid during the year. It also includes your name and taxpayer identification number (TIN).
These payments generally are not subject to withholding. However, “backup” withholding is required in certain situations.
Payments subject to backup withholding: Backup withholding can apply to most kinds of payments that are reported on Form 1099. These include:
Interest payments (Form 1099–INT)
Dividends (Form 1099–DIV)
Patronage dividends, but only if at least half of the payment is in money (Form 1099–PATR)
Rents, profits, or other gains (Form 1099–MISC)
Commissions, fees, or other payments for work you do as an independent contractor (Form 1099–MISC)
Royalty payments (Form 1099–MISC), and
Certain other payments.
Backup withholding also may apply to gambling winnings (Form W-2G), unless subject to regular gambling withholding.
Withholding rules. When you open a new account, make an investment, or begin to receive payments reported on Form 1099, the bank or other business will give you Form W-9, Request for Taxpayer Identification Number and Certification, or a similar form. You must enter your TIN on the form and, if your account or investment will earn interest or dividends, you also must certify (under penalties of perjury) that your TIN is correct and that you are not subject to backup withholding.
The payer must withhold at a flat 28% rate in the following situations:
You do not give the payer your TIN in the required manner
The IRS notifies the payer that the TIN you gave is incorrect
You are required, but fail, to certify that you are not subject to backup withholding
The IRS notifies the payer to start withholding on interest or dividends because you have underreported interest or dividends on your income tax return. The IRS will do this only after it has mailed you four notices over at least a 210-day period.
How to prevent or stop backup withholding. If you have been notified by a payer that the TIN you gave is incorrect, you usually can prevent backup withholding from starting or stop backup withholding once it has begun by giving the payer your correct name and TIN. You must certify that the TIN you give is correct.
If you have been notified that you underreported interest or dividends, you must request and receive a determination from the IRS to prevent backup withholding from starting or to stop backup withholding once it has begun.
Backup withholding. If income tax has been withheld under the backup withholding rule, take credit for it on your tax return for the fiscal year in which you received the income.
Manendra Kothari is qualified Chartered Accountant from India and qualified and licensed CPA from US. He has 15+ years of total accounting and tax experience working on board of large and small public accounting firms.
Our experience on board of large US accounting firm include handling large corporate accounts, business consulting, tax planning and compliance for high net worth clients to multi million dollars corporations in various industries. With special focus in an international tax matters and domestic and cross border merger and acquisitions, we have handled IRS matters at all level from examination to IRS appeals.
Article Source: http://www.abcarticledirectory.com
Manendra (Manen) Kothari, CPA
SK Tax Associates, CPAs
127 S. Roselle Rd Ste # 200 Schaumburg, IL 60193
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