Backup With Holding Tax?
I went to a reputable Bank last week to open a checking account. Everything was going smoothly until they asked the question of backup withholding.
The question says that " Has IRS notified you about the backup withholding" I don't remember the exact question but it was related to backup withholding.
I need to select Yes or No for the answer to open a bank account. Since I wasn't clear on that I decided not to open the account.
Can you please recommend what is this back up with holding? when IRS notified me about this backup withholding? Do I need to select Yes or No for this answer?
Banker is of no help in this question.
1 attorney answer
Usually only non-resident aliens are subject to backup withholding. Per the IRS, you may be subject to backup withholding under the following circumstances:
When you open a new account, make an investment, or begin to receive payments reportable on Form 1099, you must provide your TIN. For certain types of payments, you must provide the TIN in writing and certify under penalties of perjury that it's correct. In those cases, the bank or business will give you Form W-9, Request for Taxpayer Identification Number and Certification or a similar form. If your account or investment will earn interest or dividends, you must also certify that you're not subject to backup withholding due to previous underreporting of interest and dividends.
You may be subject to backup withholding and the payer must withhold at a flat 24% rate when:
You don't give the payer your TIN in the required manner.
The IRS notifies the payer that the TIN you gave is incorrect.
The IRS notifies the payer to start withholding on interest or dividends because you have underreported interest or dividends on your income tax return. The IRS will do this only after it has mailed you four notices over at least a 120-day period.
You fail to certify that you're not subject to backup withholding for underreporting of interest and dividends.
A TIN and a social security number are not the same thing.
This may provide you additional information about backup withholding: https://www.irs.gov/pub/irs-pdf/p1281.pdf
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