PayPal Savings | Backup Withholding
What is backup withholding?
When you receive an interest payment in your PayPal Savings account, the US Internal Revenue Service (IRS) considers this reportable income. Generally, taxes are not withheld from such payments, as it is expected that you report this income when you file your federal income tax return and pay taxes where required. However, there are situations where we are required to withhold and send 24% of your payment to the IRS. This is known as backup withholding.
You can learn more about backup withholding by visiting IRS | Backup withholding.
Why are my PayPal Savings interest payments subject to backup withholding?
We were notified that the name and/or social security number (SSN) on your account does not match IRS records, and you have failed to respond by the given deadline to our requests to provide documentation that confirms your taxpayer information.
What actions can I take to stop backup withholding from being applied to future PayPal Savings interest payments?
Follow the instructions provided in the B-Notice letter you should have received in the mail or in the email we sent you. You can log in to your account and follow the prompts to submit the required documentation or submit via our Secure Mail Center or by mail. The type of B-Notice you received will dictate the documentation required.
| Notice Type | Required Documentation |
|---|---|
|
1st B-Notice |
Updated Form W-9 |
|
2nd B-Notice |
Copy of SSN Card |
You can learn more about IRS B-Notices by visiting IRS | Backup withholding “B” program.
Can backup withholding be refunded back to me?
We can’t refund any amount that has been sent to the IRS, but you can claim a credit for the backup withholding when you file your federal income tax return. We will report any backup withholding you incurred during the year on a Form 1099-INT that will be issued by January 31 of the next calendar year.
Does this affect money that I receive from friends and family?
No. Money sent as a Friends and Family payment is not considered to be reportable income and, therefore, is exempt from backup withholding.
What if I still have additional questions?
We recommend you visit the IRS webpages provided above or contact a professional tax advisor.