Certain incomes paid by banks or other businesses are not subject to withholding. However, "backup" withholdng is required in certain situations:
Payment may subject to backup withholding
• Investment payment (Form 1099-INT)
• Dividends (Form 1099-DIV)
• Patronage dividends, if at least half the payment is cash (Form 1099-PATR)
• Rents, profits, or other gains (Form 1099-MISC)
• Commissions, fees, or other payments for independent contractor work (Form 1099-MISC)
• Payments by brokers (Form 1099-B)
• Payments by fishing boat operator (Form 1099-MISC)
• Royalty payment (Form 1099-MSIC)
• Gambling winnings (Form W-2G)
Payment not subject to backup withholding
Payments reported on Form 1099-MISC unless one of the following situations applies:
• Amount you received is more than 600.
• Payer give you a Form 1099 last year
• Payer pay you last year and that payment is subject to backup withholding.
Usually, bank or businesses will give you Form W-9 to get your TIN. If they don't get correct TIN, or don't get TIN in time, they must withhold at a flat rate 28%.
PSQ
Source: http://www.irs.gov
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