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Backup Withholding

Income filed on a Form 1099 is generally subject to backup withholding. These payments include investment income, such as interest and dividends, rents, royalties, payments for work done as an independent contractor, and broker payments. According to the IRS, “Under the backup withholding rules, the business or bank must withhold on a payment if:
You have not given the payer your taxpayer identification number in the required manner,
The IRS has notified the payer that the taxpayer identification number you provided is incorrect.
The IRS has notified the payer to start withholding on interest and dividends because you had not reported all of your interest or dividend income in prior years; or
You have not certified, when required, that you were not subject to backup withholding on interest and dividends.”

See also: Form 1099