Definitions for "Backup Withholding"
An IRS procedure designed to ensure that a taxpayer who does not have a Social Security number will still have taxes withheld on his/her income. see also withholding.
Income tax withholding required from nonemployee compensation when the payee fails to furnish the payer with a taxpayer identification number or the payer is notified by the IRS that the payee's TIN is incorrect.
Those who make payments to others of interest, dividends, rents, royalties, etc., must, under certain circumstances, withhold income tax from the payment. For example, if you fail to provide your bank with your taxpayer identification number, the bank is required to withhold income tax from the interest it pays you.