New Tax Law Changes Backup Withholding Rate

The Tax Cuts and Jobs Act reduced the backup withholding tax rate to 24 percent. When it applies, backup withholding requires a payer to withhold tax from payments not otherwise subject to withholding.

Payments subject to backup withholding include:

• Interest payments
• Dividends
• Patronage dividends, but only if at least half of the payment is in money
• Rents, profits or other income
• Commissions, fees or other payments for work performed as an independent contractor
• Payments by brokers and barter exchange transactions
• Payments by fishing boat operators, but only the portion that's in money and represents a share of the proceeds of the catch
• Payment card and third-party network transactions
• Royalty payments 

See IRS Publication 1281 for when backup withholding applies and other information.