Questions and Answers
We received an IRS notice of backup withholding on a customer who, among other accounts, has an IRA. Are IRA earnings subject to backup withholding?
According to the IRS General Instructions for Forms 1099, 1098, 5498, and W-2G, to be subject to backup withholding, a payment must be a reportable interest or dividend payment. IRA custodians/trustees do not report interest or dividends earned on IRAs as they would for other accounts. The same is true for Coverdell Education Savings Accounts (CESAs) and Health Savings Accounts (HSAs). The IRS instructions also specify any IRA, CESA, or HSA, as examples of payments to which backup withholding does not apply.
