procedure used to ensure that federal income tax is paid on earnings even though the recipient cannot be identified by a Social Security number. Banks, brokers, and other entities report nonwage earnings paid out on IRS Form 1099. When the form cannot be filed because it lacks the taxpayer's Social Security number, 20% of the interest, dividends, or fees is withheld by the payer and remitted to the federal government. For example, if interest earned on a bank account is $1000 and there is no Social Security number on file for the account, the bank withholds $200. Financial institutions have account holders fill out a Federal W-9 form requiring the individual to certify that the Social Security numbers given are correct and that they are or are not subject to backup  withholding. The information regarding interest payments is reported by the bank to the IRS for comparison with individual tax returns. Backup withholding is not an additional tax; the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. The IRS Code Section 3406  (a)(1)(c) applies to backup withholding.