- A review course on education tax credits
- Unclaimed property can be a business issue
- Watch out for special rules when making a Roth conversion
- Some business meals get a full deduction
- DB(k) retirement plans are new this year
- Pay yourself reasonable wages
- The kiddie tax: A basic review
- Follow IRA withdrawal rules
- Homebuyer tax credit extension
- Collectibles face special tax rules
- Rental property tax rules are complicated
- Payroll tax update
- Don't overlook the Roth five-year holding requirement
- Can you qualify for the small business health insurance credit?
- Military tax breaks are available
- Do you need to file an FBAR?
- Roth IRA conversion: Act now, pay later?
- Start your 2010 planning with your 2009 tax return
- Don't ignore employer penalty notices
- The HIRE Act offers tax breaks for hiring
- Direct deposit: Should you buy savings bonds?
- The Patient Protection and Affordable Care Act reforms health care
- Can you take a home office deduction?
- Deducting interest expense: What you need to know
- Did you receive Form 1099-C?
- Missing a W-2?
- Who has to file an income tax return?
- New law allows early deduction for Haiti relief donations
- The dependency exemption: What you need to know
- What's your status?
- Payroll - A 2010 employer update
- Review payroll reporting for 2009
- What to expect on your 2009 return
- Check these vehicle tax breaks for 2009
- Know the rules for backup withholding
- Tax issues come with gifting stock
- Hiring seasonal employees? What you need to know
- Don't get tripped up by a wash sale
- New law includes two important tax changes
- Two IRA tax breaks are scheduled to expire soon
- Take a tax deduction for worthless stock
- Withdrawals from your SIMPLE IRA may not be so simple
- Savings bonds can help pay for college
- Tax tips for first-time employers
- First-time homebuyer credit to expire November 30
- Closing your business has tax implications
- You need basis to deduct an S corporation loss
- Unemployed? Pay health premiums from your health savings account
- Some IRA terms you should know
- Employee or independent contractor? Don't misclassify workers
- Take a penalty-free IRA withdrawal for medical expenses
- Your business vehicle expenses are deductible
- Plan for the phase-out of tax breaks
- Your business could benefit from the extended net operating loss carryback
- When is income taxable, and when is it not
- IRS has a new procedure for correcting payroll returns
- Capture tax breaks when you refinance
- Prepare now for a possible disaster
- Tax law changes could affect your 529 plan
- Two reasons to review tax payments
- The COBRA credit: What employers must know
- Don't waste your tax refund
- A new vehicle could give you a new tax break
- Check out the "making work pay" credit
- Don't overlook a theft loss deduction
- Who owes self-employment tax?
- The Internal Revenue Service and Treasury Department Release Additional FBAR Guidance
- HIRE Act
- Health Care Updates
News
Know the rules for backup withholding
December 23, 2009
As you organize your payroll records for year-end processing, it's a good time to make sure you're complying with backup withholding rules. These rules come into play when you make payments such as rents, commissions, or fees to businesses or individuals who have not supplied you with a valid taxpayer identification number (TIN).
What's backup withholding? It's a 28% tax that you're required to withhold from payments your business makes to certain vendors. Backup withholding applies when a vendor fails to give you a TIN or when the IRS informs you a vendor's TIN is incorrect.
How does backup withholding work? Say you hire an independent contractor to design a website for your business. The contractor operates as a sole proprietor.
You know you have to file "Form 1099-MISC, Miscellaneous Income," when you pay more than $600 for certain services to a noncorporate payee (some corporate payees also) in the course of your business during the year. You ask for a TIN by sending the contractor a blank "Form W-9, Request for Taxpayer Identification Number and Certification."
The contractor ignores your request.
Under the backup withholding rules, you begin withholding 28% of the payments you make. You continue to withhold until the contractor supplies you with a valid TIN.
Until you receive the valid TIN, you remit the backup withholding to the IRS in the same way you make other payroll tax deposits.
In January, you file "Form 945, Annual Return of Withheld Federal Income Tax." You also report the backup withholding on the Form 1099 that you issue to the vendor.
Please call if you are missing TINs from vendors or others with whom you have a business relationship. We can guide you through the steps you'll need to take to avoid penalties.
For more information, contact Ross Rizzo at 212-404-5528, rrizzo@sb-cpa.com.
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