What is Backup withholding?
Backup withholding requires payers to withhold 24% of payments to contractors and vendors who fail to provide a valid taxpayer identification number on Form W-9. Under Section 70433 of the One Big Beautiful Bill Act, this obligation applies only when cumulative payments reach $2,000 annually, up from the prior $600 floor. Withheld amounts are remitted to the IRS on Form 945. The Hiring kids strategy structures family payments outside the backup withholding rules.
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