Finance Questions

What is the current percentage rate for Backup Withholding and what payments are subject to backup withholding?

The current IRS backup withholding rate is 28%.
The following payments are subject to backup withholding: 

1. Interest reportable on Form 1099-INT, Interest Income.
2. Dividends reportable on Form 1099-DIV, Dividends and Distributions.
3. Original issue discount reportable on Form 1099-OID, Original Issue Discount, if the payment is in cash.

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When will I get a refund backup withholding?

You will get a refund backup withholding if the W-9/W-8 is received within the grace period. Once the account grace period has expired, the backup withholding is immediately sent to the IRS and it is then up to the IRS to refund backup withholding. 

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What is the Account Grace Period for Backup Withholding?

Internal Revenue Service (IRS) regulations require financial institutions to obtain a valid Form W-9/W-8 from customers when a new account is opened. The documents must receive these documents within 30 (Form W-9) and 90 days (Form W-8) from the account open date. This is the grace period. 
If the documents are not received within the grace period, financial institutions must withhold on certain transactions and send that withholding to the IRS immediately. 

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What can I do to accelerate the refund of Backup Withholding from the IRS?

If your account is subject to backup withholding, it is possible for you to counteract the economic loss of cash flow by: 
A. Reducing the next estimated tax payments(s), if you file estimated taxes. 
B. Immediately adjusting IRS Form W-4, Employee Withholding Allowance Certificate, by increasing the number of additional allowances, if the employee is salaried. Therefore, less tax will be withheld by the employer. However, you need to remember to readjust the Form W-4 for the next tax year. 
C. Filing an income tax return for the year as soon as possible to obtain a refund.