Backup withholding Definition
Under certain circumstances, the Internal Revenue Service (IRS) may require Public Debt to withhold and pay to the IRS 31% of payments due to be made to a taxpayer. Payments that may be subject to backup withholding include interest, dividends, and other miscellaneous payments. Payments are subject to backup withholding if: the bond owner doesn't provide his correct taxpayer identification number (TIN) to Public Debt in the manner required by the IRS.
the IRS tells Public Debt that the bond owner provided an incorrect TIN.
the IRS tells the bond owner that he's subject to backup withholding on interest or dividends because he has underreported interest or dividends on his federal income tax return. (The IRS will do this only after it has mailed to the taxpayer four notices over at least a 120-day period.)
the bond owner is required, but fails, to certify to Public Debt that he is not subject to backup withholding.