Internal Revenue Code · 26 U.S.C.
§ 3406. Backup withholding
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 3406
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Added
- August 5, 1983 by Pub. L. 98–67
- Last amended
- July 4, 2025 by Pub. L. 119–21
- Amendments
- 7 dated changes in the source credit
- Length
- 9 subsections · 3,619 words · about 16 min to read
- Defines
- 10 terms
- Cross-references
- cites 16; cited by 8 Code sections and 38 other regulations
- Regulations
- 33 issued under this section
Subparagraphs (C) and (D) of paragraph (1) shall apply only to reportable interest or dividend payments.
For purposes of subparagraphs (C) and (D) of subsection (a)(1), the term “reportable interest or dividend payment” shall not include any payment to which section 6044 (relating to patronage dividends) applies unless 50 percent or more of such payment is in money.
The determination of whether any payment is of a kind required to be shown on a return described in paragraph (2) or (3) shall be made without regard to any minimum amount which must be paid before a return is required.
Subparagraph (A) shall not apply with respect to payments to any participating payee during any calendar year if one or more payments in settlement of third party network transactions made by the payor to the participating payee during the preceding calendar year were reportable payments.
In the case of any failure by a payee to furnish his TIN to a payor in the manner required, subsection (a) shall apply to any reportable payment made by such payor during the period during which the TIN has not been furnished in the manner required. The Secretary may require that a TIN required to be furnished under subsection (a)(1)(A) be provided under penalties of perjury only with respect to interest, dividends, patronage dividends, and amounts subject to broker reporting.
In the case of any readily tradable instrument acquired by the payee through a broker, the period described in subparagraph (A) shall start with payments to the payee made after the close of the 30th day after the payor receives notification from a broker under subsection (d)(2)(B).
Unless the payor elects not to have this subparagraph apply with respect to the payee, subsection (a) shall also apply to any reportable payment made after the close of the period described in paragraph (1), (2), or (4) (as the case may be) and before the 30th day after the close of such period. A similar rule shall also apply with respect to the period described in paragraph (3)(A) where the stop date is determined under clause (i) or (ii) of paragraph (3)(B).
The payor may elect a period shorter than the grace period set forth in subparagraph (A) or (B), as the case may be.
No person may use any information obtained under this section (including any failure to certify under subsection (d)) except for purposes of meeting any requirement under this section or (subject to the safeguards set forth in section 6103) for purposes permitted under section 6103.
For provision providing for civil damages for violation of paragraph (1), see section 7431.
A person shall be treated as failing to furnish his TIN if the TIN furnished does not contain the proper number of digits.
If the payee furnishes the payor 2 incorrect TINs in any 3-year period, the payor shall, after receiving notice of the second incorrect TIN, treat the payee as not having furnished another TIN under subsection (e)(2)(B) until the day on which the payor receives notification from the Secretary that a correct TIN has been furnished.
Except to the extent otherwise provided in regulations, any payment to joint payees shall be treated as if all the payment were made to the first person listed in the payment.
If, but for this subparagraph, there would be more than 1 broker with respect to any acquisition, only the broker having the closest contact with the payee shall be treated as the broker.
In the case of any instrument, such term shall not include any person who is the payor with respect to such instrument.
Except as provided by regulations, such term shall not include any real estate broker (as defined in section 6045(e)(2)).
To the extent provided in regulations, rules similar to the rules of paragraph (6) of section 6049(d) shall apply.
Whenever the Secretary notifies a payor under paragraph (1)(B) of subsection (a) that the TIN furnished by any payee is incorrect, the Secretary shall at the same time furnish a copy of such notice to the payor, and the payor shall promptly furnish such copy to the payee.
If the Secretary notifies a payor under paragraph (1)(B) of subsection (a) that the TIN furnished by any payee is incorrect and such payee subsequently furnishes another TIN to the payor, the payor shall promptly notify the Secretary of the other TIN so furnished.
For purposes of section 31, this chapter (other than section 3402(n)), and so much of subtitle F (other than section 7205) as relates to this chapter, payments which are subject to withholding under this section shall be treated as if they were wages paid by an employer to an employee (and amounts deducted and withheld under this section shall be treated as if deducted and withheld under section 3402).
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.
(Added Pub. L. 98–67, title I, § 104(a), Aug. 5, 1983, 97 Stat. 371; amended Pub. L. 98–369, div. A, title I, § 152(a), title VII, § 722(h)(1), (2), July 18, 1984, 98 Stat. 691, 975; Pub. L. 99–514, title XV, §§ 1521(b), 1523(b)(1), title XVIII, § 1899A(46), Oct. 22, 1986, 100 Stat. 2746, 2748, 2961; Pub. L. 100–647, title I, § 1018(u)(44), Nov. 10, 1988, 102 Stat. 3592; Pub. L. 102–486, title XIX, § 1935(a), Oct. 24, 1992, 106 Stat. 3032; Pub. L. 107–16, title I, § 101(c)(10), June 7, 2001, 115 Stat. 44; Pub. L. 110–289, div. C, title III, § 3091(c), July 30, 2008, 122 Stat. 2911; Pub. L. 119–21, title VII, §§ 70432(b)(1), 70433(d), July 4, 2025, 139 Stat. 243, 244.)
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
- broker § 3406(h)(5)(A)
- other reportable payment § 3406(b)(3)
- payor § 3406(h)(4)
- readily tradable instrument § 3406(h)(6)
- reportable interest or dividend payment § 3406(b)(2)(A)
- reportable interest or dividend payment § 3406(b)(2)(B)
- reportable interest or dividend payment § 3406(b)(7)
- reportable payment § 3406(b)(1)
- reportable payment § 3406(b)(5)
- stop date § 3406(e)(3)(B)
Regulations under this section
Treasury regulations (26 CFR) issued under § 3406
- § 31.3406-0 Outline of the backup withholding regulations.
- § 31.3406(a)-1 Backup withholding requirement on reportable payments.
- § 31.3406(a)-2 Definition of payors obligated to backup withhold.
- § 31.3406(a)-3 Scope and extent of accounts subject to backup withholding.
- § 31.3406(a)-4 Time when payments are considered to be paid and subject to backup withholding.
- § 31.3406(b)(2)-1 Reportable interest payment.
- § 31.3406(b)(2)-2 Original issue discount.
- § 31.3406(b)(2)-3 Window transactions.
- § 31.3406(b)(2)-4 Reportable dividend payment.
- § 31.3406(b)(2)-5 Reportable patronage dividend payment.
- § 31.3406(b)(3)-1 Reportable payments of rents, commissions, nonemployee compensation, etc.
- § 31.3406(b)(3)-2 Reportable barter exchanges and gross proceeds of sales of securities, commodities, or digital assets by brokers.
- § 31.3406(b)(3)-3 Reportable payments by certain fishing boat operators.
- § 31.3406(b)(3)-4 Reportable payments of royalties.
- § 31.3406(b)(3)-5 Reportable payments of payment card and third party network transactions.
- § 31.3406(b)(4)-1 Exemption for certain minimal payments.
- § 31.3406(c)-1 Notified payee underreporting of reportable interest or dividend payments.
- § 31.3406(d)-1 Manner required for furnishing a taxpayer identification number.
- § 31.3406(d)-2 Payee certification failure.
- § 31.3406(d)-3 Special 30-day rules for certain reportable payments.
- § 31.3406(d)-4 Special rules for readily tradable instruments acquired through a broker.
- § 31.3406(d)-5 Backup withholding when the Service or a broker notifies the payor to withhold because the payee's taxpayer identification number is incorrect.
- § 31.3406(e)-1 Period during which backup withholding is required.
- § 31.3406(f)-1 Confidentiality of information.
- § 31.3406(g)-1 Exception for payments to certain payees and certain other payments.
- § 31.3406(g)-2 Exception for reportable payment for which withholding is otherwise required.
- § 31.3406(g)-3 Exemption while payee is waiting for a taxpayer identification number.
- § 31.3406(h)-1 Definitions.
- § 31.3406(h)-2 Special rules.
- § 31.3406(h)-3 Certificates.
- § 31.3406(i)-1 Effective date.
- § 31.3406(j)-1 Taxpayer Identification Number (TIN) matching program.
- § 35a.3406-2 Imposition of backup withholding for notified payee underreporting of reportable interest or dividend payments.
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 16 other sections
- § 1(c) Tax imposed
- § 6049(a) Returns regarding payments of interest
- § 6042(a) Returns regarding payments of dividends and corporate earnings and profits
- § 6044 Returns regarding payments of patronage dividends
- § 6041 Information at source
- § 6041A(a) Returns regarding payments of remuneration for services and direct sales
- § 6045 Returns of brokers
- § 6050A Reporting requirements of certain fishing boat operators
- § 6050N Returns regarding payments of royalties
- § 6050W Returns relating to payments made in settlement of payment card and third party network transactions
- § 6103 Confidentiality and disclosure of returns and return information
- § 7431 Civil damages for unauthorized inspection or disclosure of returns and return information
- § 453(f)(5) Installment method
- § 31 Tax withheld on wages
- § 3402(n) Income tax collected at source
- § 7205 Fraudulent withholding exemption certificate or failure to supply information
Cited by 8 Code sections
- § 1(g)(7)(A)(iii) Tax imposed
- § 31(c) Tax withheld on wages
- § 643(d) Definitions applicable to subparts A, B, C, and D
- § 1474(c)(1) Special rules
- § 6682(a)(1) False information with respect to withholding
- § 6705(a) Failure by broker to provide notice to payors
- § 7205(b) Fraudulent withholding exemption certificate or failure to supply information
- § 7431(g) Civil damages for unauthorized inspection or disclosure of returns and return information
Cited in 38 regulations not issued under it
- § 1.468A-4 Treatment of nuclear decommissioning fund.
- § 1.671-4 Method of reporting.
- § 1.671-5 Reporting for widely held fixed investment trusts.
- § 1.871-14 Rules relating to repeal of tax on interest of nonresident alien individuals and foreign corporations received from certain portfolio debt investments.
- § 1.1012-1 Basis of property.
- § 1.1441-1 Requirement for the deduction and withholding of tax on payments to foreign persons.
- § 1.1441-2 Amounts subject to withholding.
- § 1.1441-5 Withholding on payments to partnerships, trusts, and estates.
- § 1.1441-7 General provisions relating to withholding agents.
- § 1.1446-1 Withholding tax on foreign partners' share of effectively connected taxable income.
- § 1.1461-1 Payment and returns of tax withheld.
- § 1.1471-1 Scope of chapter 4 and definitions.
- § 1.1471-3 Identification of payee.
- § 1.1471-4 FFI agreement.
- § 1.1474-1 Liability for withheld tax and withholding agent reporting.
- § 1.1474-6 Coordination of chapter 4 with other withholding provisions.
- § 1.1474-7 Confidentiality of information.
- § 1.6041-10 Return of information as to payments of winnings from bingo, keno, and slot machine play.
- § 1.6042-2 Returns of information as to dividends paid.
- § 1.6042-3 Dividends subject to reporting.
- § 1.6044-2 Returns of information as to payments of patronage dividends.
- § 1.6045-1 Returns of information of brokers and barter exchanges.
- § 1.6045-5 Information reporting on payments to attorneys.
- § 1.6049-4 Return of information as to interest paid and original issue discount includible in gross income after December 31, 1982.
Show 14 more
- § 1.6049-5 Interest and original issue discount subject to reporting after December 31, 1982.
- § 1.6049-6 Statements to recipients of interest payments and holders of obligations for attributed original issue discount.
- § 1.6049-8 Interest and original issue discount paid to certain nonresident aliens.
- § 31.3402(m)-1 Additional withholding allowance.
- § 31.6051-4 Statement required in case of backup withholding.
- § 31.6302-0 Table of contents.
- § 31.6302-1 Deposit rules for taxes under the Federal Insurance Contributions Act (FICA) and withheld income taxes.
- § 31.6302-3 Federal tax deposit rules for amounts withheld under the backup withholding requirements of section 3406 for payments made after December 31, 1992.
- § 31.6302-4 Deposit rules for withheld income taxes attributable to nonpayroll payments.
- § 31.6413(a)-3 Repayment by payor of tax erroneously collected from payee.
- § 301.6721-0 Table of Contents.
- § 301.6723-1 Failure to comply with other information reporting requirements.
- § 301.6724-1 Reasonable cause.
- § 301.7701-2 Business entities; definitions.
Amendment history
From the source credit and the official notes, newest first.
- Amended by Pub. L. 119–21Parts changed in 2025: (b)(6) (b)(6)(A) (b)(8)
- Amended by Pub. L. 110–289Parts changed in 2008: (b)(3)(F)
- Amended by Pub. L. 107–16Parts changed in 2001: (a)(1)
- Amended by Pub. L. 102–486Parts changed in 1992: (a)(1)
- Amended by Pub. L. 100–647Parts changed in 1988: (h)(5)(D)
- Amended by Pub. L. 99–514Parts changed in 1986: (b)(3)(E) (b)(6) (h)(5)(D)
- Amended by Pub. L. 98–369Parts changed in 1984: (c)(1) (d)(2)(A) (d)(2)(B) (e)(1)
- Added by Pub. L. 98–67
Where it sits in the Code
Nearby sections
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
References in Text
Section 1(c), referred to in subsec. (a)(1), to be treated, for purposes of the rate of tax, as a reference to the corresponding rate bracket under section 1(j)(2)(C) of this title, see section 1(j)(2)(F) of this title.
Amendments
2025—Subsec. (b)(6). Pub. L. 119–21, § 70433(d)(2), substituted “only where in excess of threshold” for “only where aggregate for calendar year is $600 or more” in heading.
Subsec. (b)(6)(A). Pub. L. 119–21, § 70433(d)(1), substituted “the dollar amount in effect for such calendar year under section 6041(a)” for “$600”.
Subsec. (b)(8). Pub. L. 119–21, § 70432(b)(1), added par. (8).
2008—Subsec. (b)(3)(F). Pub. L. 110–289 added subpar. (F).
2001—Subsec. (a)(1). Pub. L. 107–16 substituted “equal to the product of the fourth lowest rate of tax applicable under section 1(c) and such payment” for “equal to 31 percent of such payment” in concluding provisions.
1992—Subsec. (a)(1). Pub. L. 102–486, in closing provisions, substituted “31 percent” for “20 percent”.
1988—Subsec. (h)(5)(D). Pub. L. 100–647 inserted period at end of subpar. (D).
1986—Subsec. (b)(3)(E). Pub. L. 99–514, § 1523(b)(1), added subpar. (E).
Subsec. (b)(6). Pub. L. 99–514, § 1899A(46), substituted “6041A(a)” for “6041(A)(a)” in heading.
Subsec. (h)(5)(D). Pub. L. 99–514, § 1521(b), added subpar. (D).
1984—Subsec. (c)(1). Pub. L. 98–369, § 722(h)(2), substituted “(but not the reasons for the withholding under subsection (a)(1)(C))” for “(but not the reasons therefor)”.
Subsec. (d)(2)(A). Pub. L. 98–369, § 722(h)(1)(A), inserted “the payor was notified by a broker under subparagraph (B) or” after “if (and only if)” in provisions preceding cl. (i), struck out cl. (i) which read as follows: “the payor was notified by a broker under subparagraph (B),” and redesignated cls. (ii) and (iii) as (i) and (ii), respectively.
Subsec. (d)(2)(B). Pub. L. 98–369, § 722(h)(1)(B), in amending subpar. (B) generally, reenacted cl. (i), in cl. (ii) inserted “with respect to such acquisition—”, added subcls. (I) and (II), redesignated former subcls. (I) and (II) as (III) and (IV), respectively, and in subcl. (III) substituted “the Secretary notifies such broker” for “such broker is notified by the Secretary”, and in provisions following cl. (ii) substituted “shall within such period as the Secretary may prescribe by regulations (but not later than 15 days after such acquisition), notify the payor that such payee is subject to withholding under subparagraph (A), (B), (C) or (D) of subsection (a)(1),” for “within 15 days after the date of the acquisition notify the payor that such payee is subject to withholding under subsection (a)(1)(D) (or subsection (a)(1)(C) in the case of a notification described in clause (ii)(II).”
Subsec. (e)(1). Pub. L. 98–369, § 152(a), inserted provision that the Secretary may require that a TIN required to be furnished under subsection (a)(1)(A) be provided under penalties of perjury only with respect to interest, dividends, patronage dividends, and amounts subject to broker reporting.
Statutory Notes and Related Subsidiaries
Effective Date of 2025 Amendment
Pub. L. 119–21, title VII, § 70432(b)(2), July 4, 2025, 139 Stat. 243, provided that: “The amendment made by this subsection [amending this section] shall apply to calendar years beginning after December 31, 2024.”
Pub. L. 119–21, title VII, § 70433(f), July 4, 2025, 139 Stat. 244, provided that: “The amendments made by this section [amending this section and sections 6041 and 6041A of this title] shall apply with respect to payments made after December 31, 2025.”
Effective Date of 2008 Amendment
Pub. L. 110–289, div. C, title III, § 3091(e), July 30, 2008, 122 Stat. 2911, provided that:
“(1) In general.— Except as otherwise provided in this subsection, the amendments made by this section [enacting section 6050W of this title and amending this section and section 6724 of this title] shall apply to returns for calendar years beginning after December 31, 2010.“(2) Application of backup withholding.—“(A) In general.— The amendment made by subsection (c) [amending this section] shall apply to amounts paid after December 31, 2011.“(B) Eligibility for tin matching program.— Solely for purposes of carrying out any TIN matching program established by the Secretary under section 3406(i) of the Internal Revenue Code of 1986—“(i) the amendments made this section shall be treated as taking effect on the date of the enactment of this Act [July 30, 2008], and“(ii) each person responsible for setting the standards and mechanisms referred to in section 6050W(d)(2)(C) of such Code, as added by this section, for settling transactions involving payment cards shall be treated in the same manner as a payment settlement entity.”
Effective Date of 2001 Amendment
Amendment by Pub. L. 107–16 applicable to amounts paid after the 60th day after June 7, 2001, and references to income brackets and rates of tax in such amendment to be applied without regard to section 1(i)(1)(D) of this title, see section 101(d)(2) of Pub. L. 107–16, set out as an Effective and Termination Dates of 2001 Amendment note under section 1 of this title.
Effective Date of 1992 Amendment
Pub. L. 102–486, title XIX, § 1935(b), Oct. 24, 1992, 106 Stat. 3032, provided that: “The amendment made by subsection (a) [amending this section] shall apply to amounts paid after December 31, 1992.”
Effective Date of 1988 Amendment
Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.
Effective Date of 1986 Amendment
Amendment by section 1521(b) of Pub. L. 99–514 applicable to real estate transactions closing after Dec. 31, 1986, see section 1521(c) of Pub. L. 99–514, set out as a note under section 6045 of this title.
Amendment by section 1523(b)(1) of Pub. L. 99–514 applicable to payments made after Dec. 31, 1986, see section 1523(d) of Pub. L. 99–514, set out as an Effective Date note under section 6050N of this title.
Effective Date of 1984 Amendment
Pub. L. 98–369, div. A, title I, § 152(b), July 18, 1984, 98 Stat. 691, provided that: “The amendment made by this section [amending this section] shall take effect on the date of the enactment of this Act [July 18, 1984].”
Amendment by section 722(h)(1), (2) of Pub. L. 98–369 applicable as if included in amendments made by Interest and Dividend Tax Compliance Act of 1983, Pub. L. 98–67, see section 722(h)(5)(A) of Pub. L. 98–369, set out as a note under section 643 of this title.
Effective Date
Section applicable with respect to payments made after Dec. 31, 1983, see section 110(a) of Pub. L. 98–67, set out as an Effective Date of 1983 Amendment note under section 31 of this title.
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.