Why it matters
The exposure sits with the client who pays: a contractor paid with no Form W-9 on file, or an IRS CP2100 notice the client ignores, can trigger 24% withholding that is reported on Form 945, due February 1, 2027 for 2026. For 2026 payments, Form 1099-NEC starts at $2,000 (it was $600 before 2026), but backup withholding is reported in Box 4 regardless of the amount.
Example
In October 2026 a client pays a roofer $5,000 and has no Form W-9 or TIN on file. The client withholds 24%, which is $1,200, and pays $3,800. The $1,200 goes on Form 945, line 2 and in Box 4 of the roofer's Form 1099-NEC. The $1,200 is under the $2,500 annual Form 945 threshold, so if it is the client's only 2026 backup withholding, no deposits are required during the year.
Related terms
Questions about Backup withholding
What is a B notice and what are the deadlines?
When a CP2100 or CP2100A lists a payee with a bad TIN, the payer sends a First B Notice with a blank Form W-9, then a Second B Notice if the payee is listed again within three years. Send it within 15 business days of receipt, with a return date within 30 business days (IRM). For the Second B Notice only, the payee returns a Social Security card copy or Letter 147C, not a new Form W-9.
Which payments are subject to backup withholding?
Triggers: a missing TIN, an IRS notice of a wrong TIN, underreported interest or dividends (after four IRS notices over at least 120 days; the payee strikes item 2 on Form W-9), or no exemption certification. Form W-9 only collects the TIN. Most Form 1099 payments qualify; real estate transactions, retirement account distributions and unemployment compensation are excluded.
Is backup withholding the same as payroll withholding?
No. It covers nonpayroll payments and is reported on Form 945, not payroll returns. Under $2,500 for 2026 means no deposits. At $2,500 or more, deposit monthly if the lookback Form 945 line 3 was $50,000 or less, otherwise semiweekly; $100,000 on any day forces semiweekly. File by February 1, 2027, or February 10, 2027 only if all deposits were timely.