Backup withholding
Factors that necessitate backup withholding include: When an individual or entity opens a new account, makes an investment, or begins receiving payments that are to be reported on Form 1099, they must provide their taxpayer identification number (TIN) to the respective institution.If the account or investment accrues interest or dividends, they must also certify that they are not subject to backup withholding due to prior under-reporting of interest and dividends.The payer is required to withhold 24% of the payment in the following scenarios: Prevention and resolution If a payer issues a "B" notice, indicating an incorrect TIN, individuals can usually prevent or stop backup withholding by providing the correct name and TIN to the payer.In the event of a second "B" notice, verification of the TIN from the Social Security Administration or the IRS is required.[2] If notified of under-reported interest or dividends, individuals must request and receive a determination from the IRS to prevent or stop backup withholding.