federal tax

[Timothy529]

Airbnb says they do not withhold federal tax if they have your tax information. If they don't have your tax information they will withhold 24%. I don't understand why they cannot withhold federal tax if they have your tax information.  Has anyone else run into this issue?

[Lorna170]

@Timothy529  It is not necessarily a matter of them not having your Federal tax information.  It is more likely a matter of them not having an agreement with your State, County or municipality to collect the taxes and disburse to those agencies.  If AirBnB does not collect rental property or sales and use taxes for your jurisdiction, and you have not entered that information on the tax portion of the listing site for the taxes to be collected from your guests and disbursed to you, they withhold monies ostensibly to pay those "unknown" taxes in an effort to get you to comply.

Also, AirBnB does not withhold federal taxes (what you would pay via your 1040) as they are not an "employer".  They only collect a W-9, which is used to prepare a 1099 form.

From the Web:

The purpose of a W-9 is to gather tax information from a vendor. When a company pays a non-employee or other entity money more than $600 in a year for their service, the company must file an information return. To ensure the information returned is accurate, the purpose of a W-9 is to gather all required information directly from the vendor.

The Form W-9 is used to prepare a range of various informational returns to the IRS. The most common situation occurs when an independent contractor completes work for a company and receives payments. If that independent contractor receives more than $600 in a calendar year, they are required to be sent a Form 1099-MISC and self-report their own taxes.

[Mike-And-Jane0]

@Timothy529 I would assume that Airbnb is required to withhold tax only if they do not have the relevant tax information on you. If they do have the relevant tax info then they can report your earnings to the IRS hence there is no need to withhold.

As a matter of interest why would you want them to withhold tax monies? Surely it is far better for you to have this money until you need to pay it out.