Last updated: 11 October 2026 · Rates checked against: IRS Topic no. 307 — Backup withholding and IRS Publication 1281
Reviewed by Zia Shahid, Buzdy Banking Editor · Our methodology
In the United States nothing is normally deducted from your bank interest. You receive it in full, the bank reports it, and you declare it. There is one situation where money is taken straight away — and it catches people who have just opened an account.
Bank interest is ordinary taxable income, reported to you and the IRS on Form 1099-INT.
If the bank does not hold a correct taxpayer identification number for you, it must withhold 24% — "backup withholding".
The 24% is not a penalty. It is a prepayment, credited against your tax when you file. But it starts from the first payment, with no grace period and no minimum.
When the 24% applies
The IRS lists the triggers for backup withholding on interest:
- You did not give the payer your TIN in the required manner
- The IRS tells the payer the TIN you gave is incorrect
- The IRS tells the payer to start withholding because you under-reported interest or dividends on a return
IRS guidance for payers is blunt about timing: where a payee refuses or fails to provide a TIN, or gives one that is obviously wrong, backup withholding should begin immediately on reportable payments.
How to stop it
Give the bank a correct Form W-9 with your name and TIN as they appear on IRS records. Where withholding started because of an IRS notice about under-reporting, the IRS sets out its own process for lifting it.
The 1099-INT
Banks report interest to you and to the IRS on Form 1099-INT. Not receiving one does not make the income untaxable — interest is reportable whether or not a form arrives.
Frequently asked questions
Is the 24% an extra tax?
No. It is withheld in advance and credited against your liability when you file. If too much was taken, it comes back as part of your refund.
Is there a minimum before backup withholding starts?
IRS guidance for payers describes beginning withholding immediately on reportable payments where the TIN is missing or obviously incorrect.
Do I report interest if I did not get a 1099-INT?
Yes. The obligation to report the income does not depend on receiving the form.
I am not a US person. Does this apply?
Backup withholding is the rule for US persons. Non-resident aliens fall under a different regime, usually documented on Form W-8BEN. Take advice for your own status.
Sources
- IRS — Topic no. 307, Backup withholding
- IRS Publication 1281 — Backup withholding for missing and incorrect name/TIN(s)
This is information, not tax advice. The figures above were checked against the source named at the top of this page on 11 October 2026. Tax rules change, usually with each annual budget. For a decision about your own money, speak to a qualified tax adviser in your country.
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