When you pay someone who is not your employee to perform work for your business, that income is taxable to the individual. While your personal service payments to them do have regular withholding tax removed, they may still be subject to backup withholding.
You may need to pay backup withholding if the worker does not provide a correct Social Security Number (SSN) or other taxpayer identification number (TIN). Learn more about TINs on the IRS website.
Pay Backup Withholding
You must withhold Minnesota income tax on personal service payments if either:
- A worker did not provide an SSN or TIN
- A worker's SSN or TIN is incorrect