When am I subject to backup withholding?
To be subject to a backup withholding, the payment must be of a type which is allowed to be withhold. When there is such a payment, it may be withheld by the payer for backup withholding in any of the following circumstances:
1. If you failed to give your taxpayer identification number to the payer.
2. If you have not certified, under penalty of perjury, that your taxpayer identification number is correct (this applies for payments relating to any interest, dividend, broker or barter exchange account or instrument opened or obtained after 1983).
3. If you have not certified, under penalty of perjury, that you are not subject to backup withholding (this applies to dividend and interest accounts or instruments opened or obtained after 1983).
4. If you have provided the payer with an incorrect taxpayer identification number, and the IRS has notified the payer of this fact by sending the payer a CP2100 or CP2100A Notice.
5. If the IRS determines that you have underreported interest and/or dividends and they notify the payer that it should therefore withhold funds.