What is backup withholding?
Backup withholding can start for different reasons. The name on your account may not match IRS records, or you may still need to file a tax return from a prior year. If the IRS informs M1 that you are subject to backup withholding, we’ll withhold 24% of affected income. This money is deposited with the IRS.
Types of backup withholding
Type B
Name and Taxpayer Identification Number (SSN or EIN) on your M1 account do not match IRS records
24% withholding applies to dividends, interest, sale proceeds, and other income.
Type C
IRS has notified M1 that you are subject to backup withholding
24% withholding applies to dividends and interest
How to resolve backup withholding
Type B
You will receive a “B-notice” from M1 or Apex Clearing. Read this carefully before responding.
If this is the first time your accounts are flagged for “B” withholding, complete form W-9 and return as indicated
If this is not the first time your accounts have been flagged for “B” withholding, please provide documentation as indicated in the notice
Type C
If the IRS informs M1 that you are subject to “C” withholding, we’ll send you an email notification to let you know backup withholding has started
Review any letters you received from the IRS
File any missing tax returns with the IRS and report the correct amount of interest and dividends
Amend previously filed tax returns to report corrected interest and dividend income
Once the situation that triggered backup withholding is reconciled, the IRS will notify M1 to stop backup withholding
More information on backup withholding is available from the IRS:
M1 and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. It is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.
This content was generated using artificial intelligence and is intended for informational and educational purposes only. While reasonable efforts are made to ensure accuracy, AI-generated outputs may omit key context; and should not be construed as financial, investment, legal, or tax advice. Users should independently verify all information and consult a qualified professional before making any financial decisions.
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