New Federal Income Tax Withholding Provisions For Contractors

Construction Contractor Taxes

If you represent a government entity that makes payments to contractors for products or services—or you are a contractor yourself—you may be interested in learning more about the new federal income tax withholding provisions under Internal Revenue Code § 3402(t). These new provisions will need such payers to withhold three percent (3%) from certain payments for products and services, beginning on January 1, 2013. These requirements apply to all federal and state agencies and certain units of local government.

To learn more about which entities are required to withhold, which payees may be exempt from withholding, and which payments are subject to this withholding, you can join one of two free phone forums offered by the IRS “Office of Federal State and Local Governments.” The teleconference will be held on August 4th and August 18th. Each teleconference will be limited to 1,000 participants. If you have a specific issue that you would like the speakers to discuss, you can contact the IRS at: You can find more information about the section 3402(t) withholding on the FSLG website:,,id=96062,00.html.

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