What is backup withholding?

What is backup withholding?

The Internal Revenue Service (IRS) places a backup withholding tax on your funds when the information you have given to us does not match their records. This means you are not paying the correct tax on your income.

If your legal filing name, Social Security Number (SSN), or Tax Identification Number (TIN) on our system do not match IRS records, First Data sends you a B notice. Missing information, or differences between records such as unexpected spacing or symbols, can cause issues; for example, “AB & C LLC” instead of “AB and C LLC”.

If you do not respond to your B notice within 30 calendar days, the IRS instructs us to withhold 28% of your daily funds until you correct the issue. This is known as backup withholding.

Modified on: Mon, 29 Oct, 2018 at 5:44 AM