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.
