The Tax Cuts and Jobs Act 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:
- Interest payments
- Patronage dividends, but only if at least half of the payment is in money
- Rents, profits or other income
- Commissions, fees or other payments for work performed as an independent contractor
- Payments by brokers and barter exchange transactions
- Payments by fishing boat operators, but only the portion that's in money and represents a share of the proceeds of the catch
- Payment card and third-party network transactions
- Royalty payments
See IRS Publication 1281 for when backup withholding applies and other information.