The Internal Revenue Service sends a B notice to organizations to require backup withholding taxes of 28 percent for clients or vendors who provide incorrect taxpayer identification numbers. The IRS also can require backup withholding for individuals who underreport their incomes, notes the IRS.
Several forms of income can be subject to backup withholding, including interest payments and payments to independent contractors reported on Form 1099. Regular wages and pension payments are not subject to backup withholding. To cease backup withholding, an individual must provide a correct taxpayer identification number and must certify the number is correct. Taxpayers can take credit for the extra withholding on their tax returns, adds the IRS.