Backup Withholding

Second, there is the case of “backup withholding.” A 501(c)(3) needs to get an IC’s Social Security number (SSN) or Employer Identification Number (EIN) before paying the IC and must include it on Form 1099-MISC, Miscellaneous Income (the form a 501(c)(3) must use to report to the IRS what it paid the IC). If the 501(c)(3) fails to do that, it must withhold 28 percent of the IC’s pay. This is called “backup withholding,” and it safeguards against the possibility that an IC will not report its earnings to the IRS or pay the taxes due on it.

For a complete explanation of backup withholding, click here.