Per Diem Rates from the U.S. General Services Administration
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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
What is Backup Withholding?
Backup withholding is federal income tax withheld from payments made to certain nonemployees. The backup withholding rate for 2021 is 24%. (Note that P.L. 115-97 lowered the backup withholding rate from 28% to 24% for tax years beginning after 2017 and before 2026. "P.L." stands for Public Law).
When Backup Withholding Applies
When you hire an independent contractor to perform services for your business and you expect to pay that person $600 or more during the tax year, you should get that person's taxpayer identification number before he/she begins working. If the contractor refuses to provide you with a tax identification number, you are required to withhold backup withholding from such payment(s).
What is a Tax Identification Number?
A tax identification number may be the independent contractor's Social Security number or Federal Employer Identification Number (EIN).
Note that if an independent contractor has employees, he/she is required to have a federal employer tax identification number (EIN).
How to Request a Taxpayer Identification Number
To request a tax identification number from an independent contractor, have the individual complete Form W-9 Request for Taxpayer Identification Number and Certification and return it to you for your records.
How to Report Backup Withholding
Report backup withholding on Form 1099-MISC.
If you paid an independent contractor $600 or more during the tax year and that individual provides you with a tax identification, then no backup withholding is required. However, you still have to report payments of $600 or more made to any independent contractor on Form 1099-MISC.
Corporation
Backup withholding does not apply to individuals operating as a corporation. For example, if you hire an individual to perform services for your business and that individual's business is organized as a corporation, backup withholding does not apply. You should receive a billing statement for your records that shows the name of the corporation.