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What is Form W9 and backup withholding?
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Your investment income is generally not subject to regular
tax withholding, however, it
may be subject to backup withholding to ensure that income tax is collected on this taxable income. Backup
withholding can be taken
by the IRS from your investment income if:
 | you fail to furnish your taxpayer identification number
on Form
W9, Request for
Taxpayer Identification Number and Certification, to payers of interest or
dividend income; |
| you give them the wrong number; or |
| you ignore notices from the IRS claiming that you have
under reported interest or
dividend income on your tax return. |
Under backup withholding, when you open up a new account you must certify under
penalties of perjury that your social security number is correct and that you are not
subject to backup withholding on Form
W9, Request for
Taxpayer Identification Number and Certification.
The backup withholding tax rate is
28%.
Additionally, if you don't give the payer your taxpayer identification number the
following can be subject to backup withholding:
| money you earn as an independent contractor if your fees are $600 or more; |
| payments from brokers; |
| royalty payments; and |
| gambling winnings. |
Form
W9, Request for
Taxpayer Identification Number and Certification, is used to certify under penalties
of perjury that your social security number is correct and that you are not subject to
backup withholding. If you fail to make this certification on a Form W-9, or similar
statement, backup withholding may begin immediately on your new account, and
28% of the
interest or payments paid on your account will be withheld for income tax.
There are both civil and criminal penalties if you provide false information to avoid
backup withholding.
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Related tax
information about Form W9 and backup withholding |
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| General Tax Questions |
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IRS publications about
Form W9 and backup withholding:
For additional information about Form W9 and backup
withholding refer to
IRS Publication 505, Tax
Withholding and Estimated Tax and Tax
Topic 307. Also see
IRS Publication
17, Your Federal Income Tax. |
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Ask Julian Block your IRS and tax questions! |
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If you can't find the answer to your IRS or tax question in our
web you can call former IRS Special Agent and one of the country's foremost tax attorneys, nationally syndicated columnist ("The Tax
Adviser") Julian Block. Julian is also the tax Editor of Mutual Funds Magazine, America's premier investment magazine. To
call Julian for a tax consultation click
here. |
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