Glossary

Backup Withholding

Backup withholding is a tax withholding requirement that applies to certain types of income, such as interest, dividends, and non-employee compensation. The IRS requires backup withholding when taxpayers fail to provide a correct Taxpayer Identification Number (TIN), such as a Social Security Number, on tax forms, or when they fail to report income properly.

The backup withholding rate is typically 24%, and it applies to payments reported on forms like:

Form 1099-INT (interest income).
Form 1099-DIV (dividend income).
Form 1099-MISC (miscellaneous income for non-employees).

Backup withholding ensures that taxes are collected on income that might otherwise go unreported. To stop backup withholding, taxpayers can update their tax information by providing a correct TIN or by filing corrected tax returns.

Recommendation

Letter 3523: Notice of Disallowed Refund Claim

IRS Letter 3523 notifies taxpayers that their refund claim has been disallowed, with details on appealing the decision if necessary.

CP05A Notice: Information Verification Needed

The IRS CP05A Notice requests additional information from taxpayers to verify entries on their tax return before the refund can be issued.

IRS Form 12153: Request for a Collection Due Process (CDP) Hearing

IRS Form 12153 is used to request a Collection Due Process (CDP) hearing to appeal IRS enforcement actions, such as liens or levies.

Child and Dependent Care Credit

The Child and Dependent Care Credit allows taxpayers to claim a credit for a portion of childcare expenses for children under 13 or dependents who cannot care for themselves.

Payment Plan

An IRS Payment Plan allows taxpayers to pay their tax debt in monthly installments over time, helping them manage large tax liabilities.

Letter 525: General 30-Day Letter

IRS Letter 525 notifies taxpayers of proposed changes to their tax return and provides 30 days to accept the changes or file an appeal.

Letter 2057: Non-Filer Notice

IRS Letter 2057 notifies taxpayers that they have failed to file a required tax return and provides instructions on how to file to avoid penalties.

CP02 Notice

The CP02 notice informs taxpayers about significant changes to their tax account status, including refunds or amounts owed.

CP71A Notice: Annual Reminder of Balance Due

IRS CP71A Notice is an annual update for taxpayers with unpaid taxes, detailing the remaining balance and steps for resolving the debt.

CP297A Notice: Final Notice of Intent to Levy on Social Security Benefits

IRS CP297A Notice is a final notice informing taxpayers of an impending levy on Social Security benefits due to unpaid taxes, with options to prevent levy actions.