Backup withholding is a procedure used to ensure that federal income tax is paid on earnings even though the recipient cannot be identified by a Social Security number. Banks, brokers, and other entities report nonwage earnings paid out on IRS Form 1099. When the form cannot be filed because it lacks the taxpayer's Social Security number, 28% (through December 31, 2012) of the interest, dividends, or fees is withheld by the payer and remitted to the federal government.
An identifying number for individuals that is furnished by the Social Security Administration. Social Security numbers are required for all individual taxpayers and dependents. It is the counterpart of the Employer Identification Number (EIN) that is used for non-individual entities such as businesses, trusts, and partnerships.
A Taxpayer Identification Number (TIN) is an identifying number assigned to a taxpayer or entity for tax purposes in the United States.
