BIR Releases Advisory on Backup Withholding for Employees Without Valid Social Security Numbers

Joel A. Lee, CPA, Director of the Virgin Islands Bureau of Internal Revenue, reminds contractors and employers of the requirements for the back up withholding for those casual laborers or employees who do not have a valid Social Security number. All contractors and employers who employ persons without valid Social Security numbers must withhold payments at the rate of at least 24% of the gross amount of each payment and submit that payment to the Bureau of Internal Revenue on behalf of those workers and employees.

Payments that may be subject to backup withholding include, but are not limited to, interest, dividends, rents, royalties, commissions, fees and non-employee compensation. Withheld payments are included on the Form 1099 MISC or Form 1099 NEC issued to the employees at year's end. Withheld payments are remitted to the Bureau on Form 1042-S, Form 1042-T and the annual reporting on Form 1042.

Contractors and employers are cautioned that they are responsible for withholding the taxes and paying the withheld taxes to the Bureau for workers, employees, independent contractors, or casual laborers who fail to provide a valid Social Security number upon employment. If any contractor or employer fails to follow the provisions discussed, the taxes required to be withheld will be collected from the contractor or employer in accordance with the Internal Revenue Code, as mirrored in the Virgin Islands.

If you have any questions concerning back up withholding, please contact the Office of Chief Counsel at (340) 714-9310.