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What Is Backup Withholding?

Last Updated:
May 21, 2019

For many taxpayers, backup withholding does not apply. But If a contractor or vendor has repeatedly provided false taxpayer identification numbers or underpaid taxes, then they are required to report on a W-9 form that backup withholding applies to them. If they fail to report this to payers (people who pay them) then the payer may receive a CP2100 or CP2100A form from the IRS. These forms are notices that inform a payer that he or she may be responsible for backup withholding.

Backup withholding for a payee it’s typically 24% of each payment to them that’s withheld and sent to the IRS. It is recommended to talk with a tax advisor when dealing with CP2100 notices and backup withholding.

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