Backup Withholding

Backup withholding can apply to most kinds of payments reported on Forms 1099 and W-2G, including:

  • Attorney’s fees (Form 1099-NEC) and gross proceeds such as settlements paid to an attorney (Form 1099-MISC)

  • Interest payments (Form 1099-INT)

  • Dividends (Form 1099-DIV)

  • Payment Card and Third Party Network Transactions (Form 1099-K)

  • Patronage dividends, but only if at least half the payment is in money (Form 1099-PATR)

  • Rents, profits, or other gains (Form 1099-MISC)

  • Commissions, fees, or other payments for work you do as an independent contractor (Form 1099-NEC)

  • Payments by brokers/barter exchanges (Form 1099-B)

  • Payments by fishing boat operators, but only the part that is in money and that represents a share of the proceeds of the catch (Form 1099-MISC)

  • Royalty payments (Form 1099-MISC)

  • Gambling winnings (Form W-2G) may also be subject to backup withholding.

  • Original issue discount reportable on (Form 1099-OID), Original Issue Discount, if the payment is in cash

  • Certain Government Payments, Form 1099-G

Payments that are excluded from backup withholding:

  • Real estate transactions

  • Foreclosures and abandonments

  • Cancelled debts

  • Distributions from Archer MSAs

  • Long term care benefits

  • Distributions from any retirement account

  • Distributions from an employee stock ownership plan

  • Fish purchases for cash

  • Unemployment compensation

  • State or local income tax refunds

  • Qualified tuition program earnings