Backup Withholding Rate
Updated: 19 January 2025
What Does Backup Withholding Rate Mean?
A backup withholding rate is a tax rate applied to specific individuals, typically those with issues related to their tax identification numbers (TINs). This amount is withheld when an investor makes a withdrawal from an investment, rather than during the regular tax payment period.
Insuranceopedia Explains Backup Withholding Rate
Individuals who have no issues with their tax identification number (TIN) or have correctly filed their forms will not be subject to a backup withholding rate from the IRS, as the bureau can easily track them for tax purposes. However, for those with TIN issues, the IRS imposes a flat 28% backup withholding tax, which may be deducted from investment earnings such as stocks, dividends, or rental income.
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