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Backup Withholding

A form of tax withholding on income from stock sales, interest, dividends, or other types of payments reported on IRS Form 1099. The current rate of backup withholding is 24%, but it was 28% before 2018. Brokerage firms are required to make backup withholding on stock sales when the client has not completed and filed Form W-9 (for US tax residents) or Form W-8BEN (for nonresidents).

For details, including ways in which US citizens and nonresident aliens can recover backup withholding, see the FAQ on this topic.

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