Airbnb doesn’t typically hold back any funds for taxes. You still have to pay taxes on your earnings, but Airbnb doesn’t pay them for you. You’re considered self employed, so you have to calculate and pay your taxes on your own. However, you have to provide your taxpayer information so Airbnb can identify you. Airbnb withholds taxes sometimes, but you can easily remedy this in most instances. Keep reading to find out more about Airbnb backup withholding.
What is Airbnb Backup Withholding?
Airbnb holds back host earnings for a variety of reasons. However, it usually happens if the host doesn’t provide taxpayer identification info. Airbnb must report your income to the IRS, so they have to hold back money to cover taxes if they don’t know who you are. They usually withhold about 24%, which is more than most employers would withhold. A backup withholding could also be the result of underreporting your income to the IRS.
If Airbnb takes money from your earnings, they won’t issue a refund if they take too much. They send all the money to the IRS along with your tax forms, so the IRS is responsible for refunding any extra backup withholdings.
Who is Subject to Withholding?
You may be subject to backup withholding by Airbnb if you fail to provide an accurate taxpayer ID number or social security number. Airbnb is a third-party payment processor, so they must report income to the IRS via an information return. If your taxpayer info doesn’t match, Airbnb will impose a backup withholding on your account.
How to Avoid Airbnb Withholding
Airbnb often takes more money than you will owe, so you should avoid backup withholding. To avoid being subject to backup withholding, make sure the taxpayer ID number you provide to Airbnb is accurate. In addition, make sure you are accurately reporting the income you earn, and paying any taxes you may owe to the IRS on time.
How to Get Verified
You need to submit your taxpayer information in a timely manner to avoid backup withholding. Usually, you can cover this requirement with a social security or taxpayer ID number. You may also need to provide government ID to verify your taxpayer info. Some examples of acceptable ID include driver’s licenses, passports, identity cards, or visas. Sometimes, Airbnb might also ask you to take a picture of yourself so they can verify it matches your ID.
According to Airbnb, you have the following options for confirming your identity:
- Take a photo of your ID using your phone
- Take a photo using the camera on your computer or mobile device
- Upload an existing photo of your ID
- Add your legal first and last name
- Add your address (this should match where you get banking documents or utility bills)
If you’re having trouble, check out the Airbnb troubleshooting guide here.
Other Reasons for Backup Withholding
The IRS might hold back your money if you underreport your earnings. Remember, the IRS knows how much money you made, so they’ll know if you shortchange them at tax time. Don’t get cute and try to play down your earnings, or the IRS might take their cut right off the top. Worse yet, the government could impose penalties, interest, or fines.
If you’re a foreign citizen, Airbnb might also withhold funds for any US-based listings. This makes it harder for foreign nationals to avoid paying US taxes on their income from American properties. Airbnb can withhold up to 30% to cover IRS taxes in this instance.
Need More Answers?
Backup withholding is a major inconvenience, so you should avoid it if possible. If you still can’t figure out why Airbnb is withholding your earnings, the tax experts at Shared Economy Tax are happy to help. We’re Airbnb tax experts with years of experience serving the hosting community, so we know the home-share business through and through. Get started today with a complimentary one-on-one strategy session with one of our tax pros. You can also signup for our newsletter using the form below for more free tax tips.