Ezel / IRS Rulings / 200906051

CCA 200906051: Backup withholding depended on whether the payment was reportable income

Number
200906051
Outcome
Advice
Document type
Chief Counsel Advice
IRS subject
Reportable Payment
Topics
Employment taxes
Code sections
§ 104, § 3406, § 6041
Ruling dated
October 27, 2008
Publicly released
February 6, 2009
Source
View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2009, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2009
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

Chief Counsel explained that section 3406 backup withholding applies only to reportable payments. The payment at issue would be reportable under section 6041 only if it was fixed or determinable income. If section 104(a)(2) excluded the payment from income, it would not be reportable and backup withholding would not apply. The advice therefore asked whether section 104(a)(2) had been determined to apply to the payments.

Ruling snapshot

  • Question: Did backup withholding apply to the payments at issue?
  • Outcome: Advice given: withholding applied only if the payments were reportable income, which depended on whether section 104(a)(2) excluded them.
  • Key authorities: IRC §§ 104(a)(2), 3406, 6041.

Full text (IRS public release)

ID: CCA_2008102715344432 Number: 200906051
Release Date: 2/6/2009
Office: -------------
UILC: 3406.02-00

From: ------------------
Sent: Monday, October 27, 2008 3:34:46 PM
To: ---------------------
Cc: ----------------------------------------------------------------- Subject: RE: -------------------Backup Withholding

Backup withholding under section 3406 only applies if the payment is a reportable payment as defined in 3406(b) - generally, interest, dividends, broker payments, and certain other reportable payments. In this case the issue is whether the payment is reportable under section 6041; if so, it is subject to backup withholding if a condition for backup withholding exists (if the payee failed to furnish a correct TIN). To be reportable under section 6041 the payment must constitute fixed or determinable income. Therefore, payments which are not income, such as those excludable under sec. 104(a)(2), are not reportable under section 6041 and backup withholding does not apply.

Has it been determined that section 104(a)(2) applies to these payments?

What does the Code say today, for your facts?

This advice was written for IRS staff and cannot be cited. Ezel checks the current Internal Revenue Code and IRS guidance against your situation, with citations.

Opens in Ezel Pro.

  • Checks the law as it stands today, not only this page
  • Cites every source it relies on, so you can verify it
  • Chat, drafting and research in one workspace