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Topic 307 Backup Withholding - YouTube
Channel: Maths Platter
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backup withholding requires appear to
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withhold tax from income which is not
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otherwise subject to withholding you may
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be subject to backup withholding if you
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fail to provide correct taxpayer
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identification number when required or
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if you fail to report interest dividend
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or patronage dividend income banks or
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other businesses that pay you certain
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types of income must file an information
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return with the IRS on form 1099 showing
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payments that you received during the
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year a form 1099 include your name and
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taxpayer identification numbers such as
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a social security number employer
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identification number or individual
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taxpayer identification number the form
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1099 will also report any amounts
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withheld under the backup withholding
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rules backup withholding can apply to
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most kinds of payments reported on form
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1099 including interest payments
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dividends patronage dividends only if at
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least half of the payment is in cash
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rents profits or other income
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commissions fees or other payments for
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work performed as an independent
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contractor payments by brokers and
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barter exchange transactions payments by
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fishing boat operators but only the part
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that's in cash and that represents a
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share of the proceeds of the catch
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payment card and third party network
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transactions and royalty payments backup
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withholding also may apply to gambling
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winnings on winnings that aren't subject
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to regular gambling withholding when you
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open a new account make an investment or
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begin to receive payments reportable on
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form 1099 you must furnish your taxpayer
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identification number in writing to the
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bank or other business and certify under
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penalty is a perjury that it's correct
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in some cases the bank or business will
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give you form w-9 request for taxpayer
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identification number and certification
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or a similar form
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your account or investment will earn
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interest or dividends
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you must also certify that you're not
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subject to backup withholding due to
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previous underreporting of interest and
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dividends you may be subject to backup
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withholding and the payer must withhold
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at a flat 28 percent rate when you don't
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give the payer your taxpayer
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identification number in the required
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manner when the IRS notifies the payer
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that the taxpayer identification number
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you gave is incorrect when the IRS
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notifies the payer to start withholding
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on interest or dividends because you
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have underreported interest or dividends
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on your income tax return the IRS will
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do this only after it has mailed you
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four notices over at least a 120 day
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period
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also if you fail to certify that you're
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not subject to backup withholding for
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under reporting of interest and
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dividends the payer must withhold at a
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flat 28 percent rate there are two
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separate backup withholding programs
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that require payers to withhold tax at
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the backup withholding rate from payees
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income under the B WH B program payers
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must withhold tax because of missing or
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incorrect and information under the B WH
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C program payers are required to
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withhold tax because of unreported
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income or unfiled tax returns to stop
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backup withholding you will need to
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correct the reason you became subject to
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backup withholding in the first place
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this can include providing the correct
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taxpayer identification number to the
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pair resolving the underreported income
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and paying the amount owed or filing the
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missing returns as appropriate if you
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receive a notice from a payer notifying
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you that the taxpayer identification
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number you gave is incorrect you can
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usually prevent backup withholding from
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starting or stop it once it has begun by
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giving the payor your correct name and
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taxpayer identification number and
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certifying that the taxpayer
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identification number you give is
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correct if you receive a second notice
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from that pair you will need to provide
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them with a copy
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of your Social Security card that shows
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your correct name and social security
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number if you had income tax withheld
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under the backup withholding rule report
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the federal income tax withholding shown
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on form 1099 on your return for the year
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you received the income if you operate
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as a partnership or subchapter S
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corporation any monies withheld because
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of an incorrect name or taxpayer
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identification number can only be
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claimed by the partners and shareholders
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partners and shareholders should report
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their respective shares of the withheld
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amounts on their individual income tax
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returns the monies aren't refundable to
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the partnership or subchapter S
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corporation you can find more detailed
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information on backup withholding in
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publication 1281 backup withholding for
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missing an incorrect name or ten
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including the procedures for payers and
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in publication 505 tax withholding and
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estimated tax
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