What is backup withholding?

Backup withholding is withholding for federal income taxes on certain types of income, including interest payments. Backup withholding may be required if the IRS notifies you that you are subject to backup withholding because you under-reported interest or dividend income on your tax return. If you have been notified that you are subject to backup withholding for under-reporting, then banks and other payers must backup withhold on certain payments until the IRS notifies you that you are no longer subject to backup withholding.