Tax Law Term “Backup Withholding“
With respect to any re-portable payment, the payor shall deduct and withhold from such payment a tax equal to 20% of such payment if the payee fails to furnish his TIN (Taxpayer Identification Number) to the payor in the manner required, or certain other circumstances in which backup withholding is required.
A backup withholding is a tax that is levied on investment income, at an established tax rate, as the investor withdraws it. Backup withholding helps to ensure that government tax-collecting agencies (such as the IRS or Canada Revenue Agency) will be able to receive income taxes owed to them from investors’ earnings. Investopedia
According to the Internal Revenue Service, in the US, backup withholding is a specified percentage withheld by the payers to be paid to the IRS on most kinds of transactions reported on variants of Form 1099. Wikipedia