What This Notice Means
You may be subject to backup withholding. That can happen if you haven't filed a Form 1040 to report interest or dividend income and pay the tax owed on it.
What Backup Withholding Is
Backup withholding is a tax that applies mainly to interest and dividend income. The IRS instructs the payers, such as banks and brokerages, to withhold a percentage of your payments so the tax gets collected. The current rate is 24%, and it can change with the tax laws.
It continues until the IRS tells the payer to stop, or until you give the payer written certification from the IRS that you're no longer subject to it.
If backup withholding is taken from your payments, report it on your return the same way you report any other withholding.
What to Do
- File your Form 1040 if you haven't already.
- Review your return for any interest or dividend income you didn't report.
- File Form 1040-X, Amended U.S. Individual Income Tax Return, if you need to report more interest or dividend income.
- Pay any tax owed on the interest or dividend income on your Form 1040 or 1040-X.
Your IRS online account shows your payoff amount and payment history, and lets you order transcripts.
Where to Start
Pull every Form 1099-INT and 1099-DIV for the year. If you don't have them all, order a wage and income transcript to see what the IRS has on file. Compare it to your return. Missing small accounts is common.
If you never filed the return, that's the first problem to fix. File it, with all of the income, as soon as you can.
Going Forward
- File your return on time.
- Report all interest and dividend income.
- Pay all taxes due.
If you received a CP540 and have unfiled returns or a balance due, call us at (813) 229-7100.