Daniel HonanFounder, Profitable Painter CPA PLLC · I help painting contractors increase profits & cash flow while reducing taxes♦ Bookkeeping ♦ Tax

Painting Business Owners: Cover your responsibility when doing backup withholding in your business.

Name: Painting Business Owners: Cover your responsibility when doing backup withholding in your business.
Uploaded: 2023-10-09T15:26:18+00:00
Duration: 30 s
Channel: Daniel Honan
Description: The speaker explains that when a painting business must perform backup withholding on payments to contractors, the correct procedure is to file IRS Form…

9 Oct 2023 · 1 min

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The speaker explains that when a painting business must perform backup withholding on payments to contractors, the correct procedure is to file IRS Form 945. This form reports the total amount withheld and includes any required contractor information. After filing, the business must remit the withheld taxes to the IRS, thereby satisfying its legal responsibility and preventing the IRS from pursuing the payer for another party’s tax obligations. The contractor, in turn, can file their own tax return and claim a refund for any excess amount that was withheld.

If you are doing backup withholding, then there is a form called Form 945. You're going to file that with the IRS, which tells them how much backup withholding you have. It'll probably also ask for some information about the contractor, what information you might have, and then you'll remit that to the IRS. If you're able to do that, then you've covered your responsibilities towards this. The contractor can file his taxes and get a refund of, of whatever extra has been withheld. But this way the IRS gets paid and they're not coming after you as the payer to try and get someone else's taxes.