Backup withholding at a flat 25% is required from various payments reportable on Forms 1099, 5498, or W-2G if a recipient fails to provide you with his taxpayer identification number (TIN) or if the Secretary of the Treasury notifies the payer that the TIN furnished by the recipient is incorrect.
If a recipient fails to furnish his TIN, the withholding requirements will apply during the period that the number has not been furnished. If the payer is notified that an incorrect number was given, the withholding will apply to payments made after the close of the 30th day after the day of notification and before the recipient furnishes another TIN.
The types of payments subject to backup withholding generally include the types of payments subject to the information reporting requirements:
(1) gambling winnings,
(2) payments of rents, royalties, prizes, and awards aggregating $600 or more,
(3) payments aggregating $600 or more for services performed for a trade or business by people not treated as employees,
(4) payments made by a trustee or issuer of an IRA or SEP,
(5) payments made by brokers and barter exchanges, and
(6) payments made by certain fishing boat operators.
Backup withholding is reported to the IRS on Form 1099-MISC (Miscellaneous Income).