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FAQ: Backup Withholding

Frequently asked questions about Backup Withholding.

State agencies making certain payments to taxpayers must withhold and pay to the IRS 24% of those payments under certain conditions.

A Taxpayer Identification Number (TIN) is a social security number (SSN) issued by the Social Security Administration (SSA) or an employer identification number (EIN) issued by IRS. A TIN can only have nine (9) numbers. It cannot have more or less than nine numbers nor can it have a combination of numbers and letters within the nine-number sequence.

  • Rent and commissions, fees or other form of compensation for services, and other fixed or determinable gains, profits, or income payments reportable on Form 1099-MISC, Miscellaneous Income.
  • Interest reportable on Form 1099-INT, Interest Income.
  • Dividends reportable on Form 1099-DIV, Dividends and Distributions.
  • Gross proceeds reportable on Form 1099-B, Proceeds From Broker and Barter Exchange Transactions.
  • Royalties reportable on Form 1099-MISC, Miscellaneous Income.
  • Gross Proceeds paid to attorneys reportable on Form 1099-MISC, Miscellaneous Income.
  • Grant payments made by governments reportable on Form 1099-G.

Yes. Payees who may be exempt are listed in the instructions for the Form W-9. They include tax exempt organizations, government agencies, corporations, and other listed entities.

Missing TIN - We consider a TIN to be missing if it is not provided. The IRS also considers a TIN to be missing if it has more or less than nine numbers or it has a letter in place of one of the nine numbers.

Incorrect TIN - The IRS considers a TIN to be incorrect if it is in the proper format but the name/TIN combination doesn't match or can't be found on IRS or SSA files.

Yes - State Agency can insure that they have received correct TINs from vendors before entering vendor payment information into R*STARS. Entering incorrect TINs into the R*STARS vendor table will result in BUWH being applied to all State payments to the vendor.

The vendor name and TIN number should be exactly same (spelling & number) name/TIN Combination assigned by the SSA or IRS.

In order to discontinue BUWH, the General Accounting Division must receive an IRS W-9 Form within 30 days (for first occurrence) or SSA-7028 or IRS letter 47C within 30 days (for second occurrence within a three-year period) from the vendor.

Yes- The vendor must ensure that any 1099 form they receive from the State has the correct name and TIN. The name and TIN on the 1099 form must agree with the name and TIN issued by the SSA or IRS.