Backup withholding Resident and nonresident withholding
Backup withholding is a type of income tax withheld on specific income types when a payee fails to:
- Provide the payer a correct taxpayer identification number (TIN)
- Certify exemption from backup withholding
- Replaces all other types of withholding
- Cannot be reduced or waived
- Does not apply to California real estate withholding
When is backup withholding required
If the payer is required to withhold and remit backup withholding to the IRS, they are also required to withhold and remit with us, with certain limited exceptions.
Income subject to backup withholding
Backup withholding can apply to most payments reported on Forms 1099 and W-2G, including:
- Non-employee compensation
Backup withholding requires a payer to deduct and withhold 7% of a reportable payment if the payee:
- Does not provide a TIN
- Provides an invalid TIN
- Fails to certify they are not subject to backup withholding
Credit for backup withholding
If a payee had income tax withheld under the backup withholding rule, the payee must report the California backup withholding on their return for the year they received the income.
Certain payees are exempt, such as government entities and tax-exempt organizations. For a complete list, refer to IRS Form W-9.
Prevent backup withholding
To stop backup withholding, the payee will need to correct the reason they became subject to backup withholding.
This can include providing the correct TIN to the payer.
How to remit:
- Calculate backup withholding; 7% of nonwage payment
- Four specific pay periods and due dates of the applicable tax year:
Payment period Due date January 1 through March 31 April 15 April 1 through May 31 June 15 June 1 through August 31 September 15 September 1 through December 31 January 15 (of the next year)
- Domestic nonresident: Submit Resident and Nonresident Withholding Statement (Form 592) with Payment Voucher for Resident and Nonresident Withholding (Form 592-V)
- Domestic Pass-Through Entity (PTE): Submit Payment Voucher for Pass-Through Entity Withholding (Form 592-Q).
- Foreign nonresident: Submit Payment Voucher for Foreign Partner or Member Withholding (Form 592-A)
- Domestic Pass-Through Entity: Submit Pass-Through Entity Withholding Return (Form 592-PTE)
- Foreign nonresident: Submit Foreign Partner or Member Annual Return (Form 592-F) with Form 592-A, if applicable
Visit Resident and Nonresident Withholding Guidelines (Pub 1017) for more information. Visit Form 592, Form 592-PTE and Form 592-F Instructions for further assistance.
How to avoid penalties
You must pay the withholding by due date to avoid penalties and interest.
- If you do not withhold, you may have to pay the amount you’re required to withhold, including penalties and interest.
If you are assessed penalties and interest and disagree with the assessment, you may file a claim for refund. For more information visit Claim for refund.