What is backup withholding?

Backup withholding is a special IRS rule that applies only in certain cases.

Backup withholding requires financial institutions to retain 24% of certain payments and send the collected amount directly to the IRS if a taxpayer has not met specific reporting requirements. Examples can include not providing a correct taxpayer identification number, or TIN, or being notified by the IRS of underreported interest or dividend income.

How do I know if I am subject to backup withholding?

You are only subject to backup withholding if any of the following applies:

You haven’t provided your correct taxpayer identification number, such as your Social Security number
The IRS has formally notified you that you underreported certain types of income in the past
You didn’t certify, when asked, usually on a Form W-9, that you are not subject to backup withholding

If backup withholding applied to you, you would be notified by the IRS.

Can I use River if I am subject to backup withholding?

No. Unfortunately, if you are subject to backup withholding, you cannot use River at this time. As this situation is uncommon, most clients are not affected. If you haven't been notified by the IRS or asked to certify your status, it’s very likely that backup withholding does not apply to you.