Overview

Backup withholding is a tax-related concept that often goes overlooked in discussions about the Form 1099 This training is all about backup withholding – the forgotten piece of the Form 1099. When you receive a Form 1099, such as a 1099-NEC form or 1099-MISC form, you’re typically reporting income from non-employee sources. Backup withholding is income tax withholding on payments to contractors (or other 1099’able payments). You’ve probably heard of backup withholding, or at least seen the box on the 1099-NEC or 1099-MISC for “federal income tax withheld,” but most people have never really thought about what this means. That’s not speculation – the Treasury Inspector General has studied the issue of businesses who should be doing backup withholding and who are not doing it – it happens over 400,000 times a year. Backup withholding is required in situations where you don’t have your contractor’s taxpayer ID number at the time you pay them, and in certain CP-2100 letter situations (if the contractor doesn’t reply to your B Notice within 30 days and you pay them again). This training will dive into backup withholding, when it’s required, how you report it (Form 945), and what happens if the IRS comes calling. We will also look at a recent court case where the IRS tried to assess $1.2 million against a small business that didn’t do backup withholding when it should have.

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