How it's applied
- Withhold on the gross reportable amount, not net of expenses or reimbursements included in the payment. If a payment mixes reportable and non-reportable amounts (for example, contractor fees plus a refundable deposit), withhold on the reportable part.
- Withholding applies to every payment made while the trigger exists: from the first payment for a missing TIN, and from the 30-business-day deadline after a CP2100 for an incorrect one.
- Deposit through EFTPS on your employment-tax schedule; report the year's total on Form 945 and each payee's amount in box 4 of their 1099. A 1099 must be filed for any payee with backup withholding even if the payment was under the reporting threshold.
- Tell the payee. A line on the remittance advice ("24% federal backup withholding applied; credited on your tax return; send a corrected W-9 to stop it") prevents most of the calls.
Rules and edge cases in the backup withholding guide.