Backup Withholding Rate Drops in 2018

As a result of the recently passed tax reform bill, the Tax Cuts and Jobs Act, the backup withholding rate will be reduced from 28% to 24% effective January 1, 2018.

 

Under Code § 3406, payors are required to deduct backup withholding on certain non-wage payments made to payees for whom an information return was filed with either a missing or incorrect TIN.  The backup withholding rate under §3406(a)(1) is the fourth lowest rate of tax under §1(c), tax rates for single individuals. 

 

Payments that may be subject to backup withholding includes commissions, fees, or other payments for work performed as an independent contractor that would normally be reported on Form 1099-MISC, along with interest and dividends.

Author

Nicolette Chasse

Nicolette Chasse is a Junior Regulatory Counsel at Sovos Compliance. Her main areas of focus are Automatic Exchange of Information (AEOI) reporting under FATCA and CRS and 1099 Federal Withholding Reporting. Nicolette received her B.A. at Trinity College and her J.D. at Penn State’s Dickinson School of Law. She is a member of the Massachusetts Bar.
Share This Post