Banks and other businesses that pay you certain kinds of income must file Form
1099, an information return, with the IRS. Generally, these payments
are not subject to withholding; however they may be subject to backup withholding.
Payments that may be subject to "backup withholding" include interest, dividends,
rents, royalties, payments for work you do as an independent contractor, and
broker payments. Under the backup withholding rules, the business or bank
must withhold on a payment if:
You have not given the payer your taxpayer identification number in the
required manner,
The IRS has notified the payer that the taxpayer identification number
you provided is incorrect.
The IRS has notified the payer to start withholding on interest and dividends
because you had not reported all of your interest or dividend income in prior
years; or
You have not certified, when required, that you were not subject to backup
withholding on interest and dividends.
The backup withholding rate is 28% in 2004.
Payers who withhold income tax under the backup withholding rules must
show the tax withheld on a Form 1099. The payer must send you this
form by January 31, 2005. If you have not received it by then, contact the
bank or business that made payments to you. You should report the amount of
tax withheld in the payment section on your Form 1040, 1040A or 1040EZ.
More detailed information on the backup withholding rules and procedures for
payers can be found in Publications 1679 and and 1281.
For more information, refer to Publication 505, Tax Withholding
and Estimated Tax.
