The Tax Cuts and Jobs Act (TCJA) reduced the backup withholding tax rate to 24 percent. When it applies, backup withholding requires a payer to withhold tax from payments not otherwise subject to withholding.
Payments subject to backup withholding include (but are not limited to):
- Interest payments;
- Rents, profits or other income;
- Commissions, fees or other payments for work performed as an independent contractor;
- Payments by brokers and barter exchange transactions;
- Payment card and third-party network transactions; and
- Royalty payments.