Backup withholding may apply to gambling winnings, interest payments, dividends, commissions, fees, payments by brokers, etc. Taxpayers may subject to backup withholding at a 24% rate if one the following situations apply:
The taxpayer does not give his taxpayer identification number (TIN) to the payer in the required manner.
The IRS notifies the payer that the taxpayer gave an incorrect TIN.
The taxpayer is required, but fail, to certify that he is not subject to backup withholding.
The IRS notifies the payer to start withholding on interest and dividends because the taxpayer has underreported them on his tax return.