New Law Repeals 3% Contractor Withholding

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New Law Repeals 3% Contractor Withholding

 

On Nov. 21, 2011, the 3% Withholding Repeal and Job Creation Act of 2011 was signed into law, repealing section 3402(t) of the Internal Revenue Code (IRC). This legislation eliminates the withholding and reporting requirements established under IRC section 3402(t) and the accompanying regulations.

IRC section 3402(t) would have required all Federal and state government entities, and some local government entities, to withhold 3% on certain payments to contractors, beginning on Jan. 1, 2013.  The regulations under section 3402(t) also required the government entity to report the amount of the payment and the amount withheld on Form 1099-MISC.

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