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What payments are subject to backup withholding?

The IRS lists the following payments subject to backup withholding.

  1. Rents and commissions, non-employee compensation for services, royalties, reportable gross proceeds paid to attorneys and other fixed or determinable gains, profits, or income payments reportable on Form 1099-MISC, Miscellaneous Income.
  2. Interest reportable on Form 1099-INT, Interest Income.
  3. Dividends reportable on Form 1099-DIV, Dividends and Distributions.
  4. Patronage dividends paid in money or qualified check reportable on Form 1099-PATR, Taxable Distributions Received From Cooperatives.
  5. Original issue discount reportable on Form 1099-OID, Original Issue Discount, if the payment is in cash.
  6. Gross proceeds reportable on Form 1099-B, Proceeds From Broker and Barter Exchange Transactions.
  7. Gambling winnings reportable on Form W-2G, Certain Gambling Winnings, unless subject to regular gambling withholding. If not subject to regular gambling withholding, backup withholding only applies if, and only if, the payee does not furnish a taxpayer identification number to the payor.
  8. Gross payments reportable on Form 1099-K, Payment Card and Third-Party Network Transactions.
  9. Form 1099-G payments that are subject to backup withholding under IRC 6041 and 3406(b)(3)(A) which include taxable grants and agricultural payments (1099-G Box 6 or 7)

Also note that you must start backup withholding if:

  1. Your vendor crosses out section 2 in the W-9s certification section
  2. The W-9 is not certified (signed) when required
  3. Your vendor does not respond with the correct documentation to a second “B” notice
  4. You receive a “C” notice from the IRS.

For additional information see Publication 1281, Backup Withholding.