# Deduct federal backup withholding from contractors

If you'd like to pay your contractors and file your 1099s directly through QuickBooks, consider [**adding Contractor Payments**](https://quickbooks.intuit.com/payroll/contractor-payments/?cid=OHH-CS_SDR-US-QBOPR-CORE-NA-XSLL-EDU-NA-PB-SDR_IAPers_Auth). If you have both employees and contractors, [**add QuickBooks Online Payroll**](https://quickbooks.intuit.com/payroll/?cid=CSSDR172-OHH-US-QBOPR-GEN-NA-XSLL-REC-NA-FY26PayrollPeakIARecUKNPayroll2).

Learn when and how you might need to set aside federal withholding for contractors.

## What's federal backup withholding?

Federal backup withholding is when the IRS determines that payments to a vendor or contractor are subject to Federal Income Tax at a rate of 24% for reportable payments.

You must withhold backup withholding on certain payments if you didn't get a TIN (Tax Identification Number) or you got an invalid TIN from your vendor. If you are not sure if the TIN is valid, this [**IRS website**](https://www.irs.gov/e-services) offers TIN matching e-services for certain payers to validate name and TIN combinations.

Contractors can claim they are exempt from backup withholding when they complete the W-9. Follow the [**IRS guidelines in Instructions for the Requester of Form W-9**](https://www.irs.gov/pub/irs-pdf/iw9.pdf) for more information.

If you do not collect backup withholding from affected payees as required, you could be liable for the amounts. For additional information on backup withholding see [**IRS publication 1281**](https://www.irs.gov/pub/irs-pdf/p1281.pdf).

## Deduct federal backup withholding

[**QuickBooks Online**](http://community.intuit.com/oicms/L2JKk4Xgn_US_en_US) or [**QuickBooks Desktop**](http://community.intuit.com/oicms/L6KKhHjlA_US_en_US): you can add a line/expense to the check to account for the federal backup withholding. The amount must be entered as a negative amount to reduce the total pay to the vendor.

QuickBooks Contractor Payments without QuickBooks accounting: you can't collect backup withholding on your contractor payments.