Keyword Analysis & Research: backup withholding

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What is the definition of backup withholding?

backup withholding. Definition. An IRS procedure designed to ensure that a taxpayer who does not have a Social Security number or tax identification number will still have taxes withheld on his/her income.

Who is exempt from backup withholding?

U.S. citizens and resident aliens will be exempt from backup withholding if: You properly report your name and Social Security number to the payer using Form W-9, and that information matches the IRS records, and You have not been notified by the IRS that you are subject to mandatory backup withholding.

What does backup tax withholding mean?

A backup withholding is a tax that is levied on investment income, at an established tax rate, as the investor withdraws it. Backup withholding helps to ensure that government tax-collecting agencies (such as the IRS or Canada Revenue Agency) will be able to receive income taxes owed to them from investors' earnings.

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