Page 15 - Tax withholding and Estimated Taxes

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
a. Your crops were destroyed or dam- • Government payments (Form 1099-G); IRS Individual Taxpayer Identification
aged by drought, flood, or any other • Dividends (Form 1099-DIV); Number, to apply for an ITIN.
natural disaster; or • Patronage dividends, but only if at least An ITIN is for federal tax use only. It does
b. You were unable to plant crops be- half the payment is in money (Form not entitle you to social security benefits or
cause of a natural disaster described 1099-PATR); change your employment or immigration status
in (a). • Rents, profits, or other gains (Form under U.S. law. For more information on ITINs,
1099-MISC);
5. Dividends and other distributions from • Commissions, fees, or other payments for get Pub. 1915, Understanding Your IRS Individ-
ual Taxpayer Identification Number.
Alaska Native Corporations to its share- work you do as an independent contractor
holders. (Form 1099-MISC); If you were assigned an ITIN before
6. Any other payment under federal law as • Payments by brokers (Form 1099-B); ! January 1, 2013, or if you have an ITIN
that you haven’t included on a tax re-
determined by the Secretary. • Payments by fishing boat operators, but turn in the last 3 consecutive years, you may
CAUTION
only the part that is in money and that rep-
To make this choice, fill out Form W-4V (or a resents a share of the proceeds of the need to renew it. For more information, see the
similar form provided by the payer) and give it catch (Form 1099-MISC); and Instructions for Form W-7.
to the payer. • Royalty payments (Form 1099-MISC).
If you don’t choose to have income tax with- Backup withholding may also apply to gambling How to prevent or stop backup withholding.
held, you may have to pay estimated tax. See winnings. See Backup withholding on gambling If you have been notified by a payer that the TIN
chapter 2. winnings under Gambling Winnings, earlier. you gave is incorrect, you can usually prevent
If you don’t pay enough tax, either through backup withholding from starting or stop backup
withholding or estimated tax, or a combination Payments not subject to backup withhold- withholding once it has begun by giving the
of both, you may have to pay a penalty. ing. Backup withholding does not apply to pay- payer your correct name and TIN. You must
ments reported on Form 1099-MISC (other than certify that the TIN you give is correct.
More information. For more information about payments by fishing boat operators and royalty However, the payer will provide additional
the tax treatment of social security and railroad payments) unless at least one of the following instructions if the TIN you gave needs to be vali-
retirement benefits, get Pub. 915, Social Secur- three situations applies. dated by the Social Security Administration or
ity and Equivalent Railroad Retirement Benefits. • The amount you receive from any one by the IRS. This may happen if both the follow-
Get Pub. 225, Farmer's Tax Guide, for informa- payer is $600 or more. ing conditions exist.
tion about the tax treatment of commodity credit • The payer had to give you a Form 1099 1. The IRS notifies the payer twice within 3
corporation loans or crop disaster payments. last year. calendar years that a TIN you gave for the
• The payer made payments to you last year same account is incorrect.
Payment to shareholders of Alaska Native that were subject to backup withholding.
Corporations (ANCs). If you are a share- Form 1099 and backup withholding are gen- 2. The incorrect TIN is still being used on the
holder of an ANC, you can request to have in- erally not required for a payment of less than account when the payer receives the sec-
come tax withheld from dividends and other dis- $10. ond notice.
tributions you receive from the ANC. To make Underreported interest or dividends. If
this request, fill out Form W-4V (or a similar Withholding rules. When you open a new ac-
form provided by the payer) and give it to the count, make an investment, or begin to receive you have been notified that you underreported
interest or dividends, you must request and re-
payer. A request for withholding isn’t effective payments reported on Form 1099, the bank or
until the ANC indicates in writing that it accepts other business will give you Form W-9, Request ceive a determination from the IRS to prevent
backup withholding from starting or to stop
the request or begins withholding. Contact the for Taxpayer Identification Number and Certifi-
payer if it isn’t clear that the payer has accepted cation, or a similar form. You must enter your backup withholding once it has begun. Your re-
quest must show that at least one of the follow-
your Form W-4V. TIN on the form and, if your account or invest- ing situations applies.
If you don’t choose to have income tax with- ment will earn interest or dividends, you must
held, or the ANC doesn’t accept your request, also certify (under penalties of perjury) that your • No underreporting occurred.
• You have a bona fide dispute with the IRS
you may have to pay estimated tax. See chap- TIN is correct and that you are not subject to about whether an underreporting occurred.
ter 2. backup withholding. • Backup withholding will cause or is caus-
If you don’t pay enough tax, either through The payer must withhold at a flat 24% rate in ing an undue hardship and it is unlikely that
withholding or estimated tax, or a combination the following situations. you will underreport interest and dividends
of both, you may have to pay a penalty. • You don’t give the payer your TIN in the re- in the future.
quired manner. • You have corrected the underreporting by
Backup Withholding • The IRS notifies the payer that the TIN you filing an original return if you didn’t previ-
gave is incorrect.
ously file one, or by filing an amended re-
• You are required, but fail, to certify that you turn, and by paying all taxes, penalties,
Banks or other businesses that pay you certain are not subject to backup withholding. and interest due for any underreported in-
kinds of income must file an information return • The IRS notifies the payer to start withhold- terest or dividend payments.
(Form 1099) with the IRS. The information re- ing on interest or dividends because you If the IRS determines that backup withhold-
turn shows how much you were paid during the have underreported interest or dividends ing should stop, it will provide you with certifica-
year. It also includes your name and taxpayer on your income tax return. The IRS will do tion and will notify the payers who were sent no-
identification number (TIN). TINs are explained this only after it has mailed you four notices tices earlier.
later in this discussion. over at least a 210-day period.
These payments are generally not subject to Taxpayer identification number (TIN). Penalties. There are civil and criminal penal-
withholding. However, “backup” withholding is Your TIN is one of the following three numbers. ties for giving false information to avoid backup
required in certain situations. • An SSN. withholding. The civil penalty is $500. The crimi-
• An employer identification number (EIN). nal penalty, upon conviction, is a fine of up to
Payments subject to backup withholding. • An IRS individual taxpayer identification $1,000 or imprisonment of up to 1 year, or both.
Backup withholding can apply to most kinds of number (ITIN). Aliens who don’t have an
payments that are reported on Form 1099. SSN and are not eligible to get one should
These include: get an ITIN. Use Form W-7, Application for
• Interest payments (Form 1099-INT);

Chapter 1 Tax Withholding for 2020 Page 13