(Revised: 11/2020)

If a payee fails to complete or provides incorrect information on the Payee Data Record form STD. 204, the agency/department will reduce the payee’s payment by withholding the federal and state backup income tax portion.  Under the Internal Revenue Code and the California Revenue and Taxation Code, an agency/department that fails to obtain the Tax Identification Number (TIN) or fails to file timely information returns can be assessed a federal backup income tax withholding and a 7 percent state backup withholding on amounts that were incorrectly reported or were not withheld.  For current federal backup withholding rate, refer to the IRS website for Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(S). 

Additional penalties, fines, and interest may be assessed by the IRS and/or Franchise Tax Board.  In order for an agency/department to avoid a penalty for filing a return that omitted the payee’s TIN, the agency/department must send the taxpayer a first annual request for the TIN by December 31 of the year in which the agency/department makes a reportable payment (for payments made before December) or January 31 of the following year (for payments made in the preceding December).  If the payee does not provide a TIN after the first annual solicitation, a second annual request is also required by December 31 of the following year.

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