Backup withholding

A flat 24% the payer must withhold from certain payments — including nonemployee compensation, interest, and dividends — and remit to the IRS, triggered when a payee fails to supply a correct taxpayer identification number on a W-9, supplies one that does not match IRS records, or when the IRS specifically notifies the payer to begin withholding. It is not a penalty but a prepayment of the payee's taxes, credited on their return. Supplying an accurate, signed W-9 generally prevents it.