Backup Withholding Definition

Backup withholding is an investment tax levied by the IRS at a fixed rate of 24% on all sources of income, like dividends, interest payments, royalties, rents, and gambling winnings.

Backup Withholding Extended Definition
Backup withholding is a form of income tax mainly applicable to investors. The main source of income for investors includes interest payments, capital gains, dividends, etc., earned from the invested assets.

To avoid tax arrears, the IRS collects backup withholding taxes when the investor collects his income.

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Last Updated By

Andrew Freiman | Feb 27, 2023