Backup Withholding
Definition
A requirement to withhold a flat percentage of certain US payments and remit it to the IRS when a payee has not supplied a valid taxpayer identification number or is otherwise flagged. It ensures tax is collected despite missing details.
Related Terms in US Tax
MACRS Depreciation
The Modified Accelerated Cost Recovery System, the standard US tax method for depreciating most business assets, which assigns assets to classes with set recovery periods and accelerated schedules.
Bonus Depreciation
A US provision letting businesses deduct a large percentage of the cost of qualifying assets in the first year, on top of or instead of regular depreciation. The applicable percentage has changed over time and should be checked for the year.
C Corporation
A US corporation taxed as a separate entity, paying corporate income tax on its profits, with shareholders then taxed on dividends — the classic double taxation. It contrasts with pass-through structures.
S Corporation
A US corporation that elects to pass income, deductions and credits through to shareholders, who report them on their individual returns, avoiding corporate-level income tax. Eligibility rules and an election are required.
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