What is backup withholding?
Backup withholding is required when the IRS notifies an individual or company that they are subject to it. Usually occurs when you have not paid your taxes and ticked the IRS off. If you were subject to backup withholding, you would have received a letter from the IRS telling you that you are subject. No letter = exempt. Apparently you are being paid as an independent contractor and not an employee.
Under IRS regulations, the City of New York is required to withhold 28% Backup Withholding from vendors that have missing or incorrect names or Taxpayer Identification Numbers (TIN) in the Financial Management System (FMS). In order to meet this mandate, a Backup Withholding process was developed for FMS that automatically withholds the required 28% from 1099 reportable payments and transmits the withheld amount directly to the IRS.
