What is Backup withholding erroneously withheld in Form 990-PF?
2.6k views | Last modified 12/27/2023 1:01:03 AM EST |

Applicable To
990-PF 990-N 990-EZ 990 8868 1120-POL

Foundations that receive interests or dividends must certify their correct taxpayer identification number to the bank or other payer on Form W-9, Request for Taxpayer Identification Number and Certification, and a failure to generate this information may result in a part of the payment being withheld. The withheld amount is considered backup withholding. The private foundations are usually exempt from taxes and are not required to pay tax and therefore do not have to generate the above-mentioned information. 
If the payer doesn't realize that the foundation is exempt from taxes and withholds a certain amount erroneously as backup withholding, the foundation can claim this amount as credit while filing Form 990-PF. If the foundation claims this amount while filing Form 990-T, then the foundation cannot claim it again while filing Form 990-PF
An organization X has obtained a loan from a private foundation Y. X is supposed to pay interest on that loan to Y every month. Y is a tax-exempt private foundation and isn't subjected to taxes, so Y doesn't have to certify the taxpayer identification number or file Form W-9. Y is a tax-exempt foundation and doesn't have to pay taxes, so it will not have a taxpayer identification number. 
If X doesn't realize Y is a tax-exempt foundation and withholds part of the payments made to Y, this withheld amount is known as backup withholding erroneously withheld. Y can claim this amount as a credit while filing the Form 990-PF return.
Here's how you can report your Backup withholding erroneously withheld in Form 990-PF using Tax990:

  1. Log into your Tax990 account.
  2. On the dashboard, click on the "Start New Return" button.
  3. Select the "Tax Year" and "Form 990-PF" options on the list of Federal returns.
  4. Enter your organization details and click "Next."
  5. On the "Organization Tax Year" page, select the tax year calendar or fiscal for which you want to file the information return. Once done, the subsequent steps will be to fill the actual parts of the form. 
  6. Under "Excise Tax Based on Investment Income," select "Credits/Payments."
  7. Enter the value of the tax withheld for your investments in the U.S. in the box given against "Backup withholding erroneously withheld."
  8. Click Next and follow the subsequent steps as prompted.
  9. Review the details, Pay, and click the Transmit button to transmit your return to the IRS.

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