Backup withholding rate

Effective January 4, 1994, the backup withholding rate on dividends, interest, and gross proceeds distributions increased from 20% to 31%. Backup withholding applies in the following situations: (1) if a United States citizen or resident, United States corporation, partnership, trust, estate, or other entity fails to certify their Taxpayer Identification Number (TIN) on Form W-9 (Request for Taxpayer Identification Number and Certification), or fails to provide documentation of their exemption from these rules; (2) if a taxpayer receives notification from the Internal Revenue Service (IRS) of a missing or invalid TIN and fails to certify the TIN by providing the payor with the required documentation; (3) if the tax­payer is notified by the IRS that the taxpayer is not subject to backup withholding because of underreporting of interest or dividends on the tax return and is not notified that it no longer applies.

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