Banks and other businesses that pay you certain kinds of income must file Form 1099, an information return, with the IRS. Generally, these payments are not subject to withholding; however they may be subject to backup withholding. Payments that may be subject to "backup withholding" include interest, dividends, rents, royalties, payments for work you do as an independent contractor, and broker payments. Under the backup withholding rules, the business or bank must withhold on a payment if:

1. You have not given the payer your taxpayer identification number in the required manner,
2. The IRS has notified the payer that the taxpayer identification number you provided is incorrect.
3. The IRS has notified the payer to start withholding on interest and dividends because you had not reported all of your interest or dividend income in prior years; or
4. You have not certified that you were not subject to backup withholding on interest and dividends.

Payers who withhold income tax under the backup withholding rules must show the tax withheld on a Form 1099. You should report the amount of tax withheld in the payments section of your Form 1040 (PDF), or Form 1040A (PDF). The payer must send you the Form 1099 by January 31. If you have not received it by then, contact the bank or business that made payments to you.

More detailed information on the backup withholding rules can be found in Publication 1281 (PDF), which also includes the procedures for payers, and in Publication 505, Tax Withholding and Estimated Tax.