When you know what triggers backup withholding, you will be able to prevent it before it starts.
When You Set Up an Account or Make an Investment
When you set up a new account or make an investment that will pay you interest, dividends, or other types of investment income, be sure to give the payer (bank, brokerage firm, or other financial institution) your correct social security number. The payer will give you a Form W-9, Request for Taxpayer Identification Number, or a similar form. Be sure to complete it, check your information to ensure that it is correct, and then turn it in. If you are opening an account or making an investment online, be sure you complete the necessary form and submit it. If you do not complete this certification form, backup withholding may begin immediately on your account.
When You File Your Income Tax Return
There are two different situations in which the IRS will determine that you have under-reported your interest and dividend income:
You filed a return but did not report all your interest and dividends that are required to be shown on your return.
You were required to file a return and report your interest and dividend income, but you did not file a return.
When you have interest, dividends, or other income from investments, check the requirements for who must file a U.S. individual income tax return. If you are required to file, be sure to include all interest, dividends, and investment income. Check the 1099 forms you receive, and the year end statements you receive on your investments, to find the total amount of income you have to report on your tax return for the year.