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Backup withholding
       
 
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Backup withholding

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Backup withholding
Tax withheld from investment income, such as Interest and dividends, to ensure that Tax is collected on the income.
    
Banks and other organizations are required to report to the IRS all Interest and Dividend payments you received, along with your Social Security number or other taxpayer identification number. If you don't give them correct reporting information, they are required to withhold 31 percent of your investment income. The IRS may also require the bank or other organization to withhold Tax if it determines you have underreported your investment income. If backup withholding is taken out of your Earnings, it Will show up as "Federal income Tax withheld" on the Form 1099-INT or Form 1099-DIV that the bank sends you each January.
    
Unless a Social Security or Tax Identification number is filed with a financial Institution, the Internal Revenue Service requires 20% of all Interest or Dividend income be withheld. Backup withholding may be avoided by filing a W-9 form when opening an account with a financial Institution.
Posted by  Uniglobal
 
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