The IRS will contact the taxpayer (payee) if they fail to report or fully report, on their federal income tax return, the correct amount of interest and dividend income on their federal income tax return. The IRS will issue up to four notices to the taxpayer during a 120-day period before notifying the payer to begin BWH on future interest or dividends payments. If no correction is made, the "C" Backup Withholding Program, IRC section 3406(a)(1)(C), provides notice to payers, such as banks and corporations, to deduct 24 percent from future interest and dividend payments. Taxpayer (payee) information How do you become subject to “C” backup withholding? You may become the subject to backup withholding if you fail to: fully report all your interest and dividend income on your tax return, file a tax return including all interest and dividend income you received, or certify, under penalties of perjury, that you’re not subject to backup withholding for interest and dividend accounts opened after 1983. Will I get notice from the IRS before the backup withholding starts? If you don’t correctly report your interest and dividends on an income tax return, the IRS will send at least four notices over a period of at least 120 days asking you to correct the unreported or underreported interest and dividend income on your income tax return. The final notice tells you you’re subject to backup withholding and the IRS will notify your payers to start backup withholding. How do I stop the backup withholding? File any missing tax returns and report the correct amount of interest and dividends. Amend previously filed tax returns to report the correct interest and dividend income. Note: You do not have to call or write to the IRS separately to say you’ve made the correction by filing an original or amended return. Payer information Backup withholding is required for: Interest and dividend accounts or instrument when you’re notified that the payee is subject to backup withholding under IRC section 3406(a)(1)(C) – or a “C” notice. Interest and dividend accounts opened or instruments acquired after 1983, and the payee fails to certify to you, under penalties of perjury, that they’re not subject to backup withholding. Some payees are exempt from backup withholding. For a list of exempt payees and other information, see Form W-9, Request for Taxpayer Identification Number and Certification, and the separate instructions for the requestor of Form W-9. What to do if you receive a “C” notice to start backup withholding? Start backup withholding at the current backup withholding rate of 24 percent. Stop backup withholding when the IRS notifies you that the taxpayer is no longer liable. Where to call for help If you have any questions about backup withholding, information reporting, Forms 1099, or the Backup Withholding “C” Notices, you may call: Toll-free telephone: 800-829-0922 or 800-829-8374 Hours: 8:30 a.m. to 4:30 p.m. Monday through Friday ET Related topics Backup Withholding Backup withholding “B” program Publications Publication 1281, Backup Withholding for Missing and Incorrect Name/TINs Publication 1335, Underreporter Backup Withholding Questions and Answers