What happens when I accidentally mark "Yes" for backup withholding on a new bank account? Has the IRS notified me?

This is actually a common mistake, so don't beat yourself up about it. When you mark "yes" to backup withholding, the bank is required to withhold 24% of interest, dividends, and certain other payments - but NOT from regular deposits like cash or checks you're depositing. Your regular deposits (the cash and checks) should be processed normally, and your uncle should be able to access and use those funds according to the bank's normal funds availability policy. The backup withholding only kicks in for payments the bank makes TO your uncle (like interest), not money he's putting INTO the account. The W-9 correction is definitely necessary, but it's mainly to ensure that if/when the account does start earning interest, the correct withholding is applied. Since most checking accounts earn little to no interest anyway, the practical impact might be minimal. That said, policies can vary by bank, so it couldn't hurt to double-check with a different representative just to be sure about their specific procedures.

Just wanted to share my experience using taxr.ai after dealing with a similar backup withholding mixup. Last year I accidentally checked "yes" on a form and was totally confused about what it meant for my account. I started searching for answers online but found contradicting information. That's when I tried https://taxr.ai and uploaded my bank documents. Their AI analyzed everything and explained exactly what backup withholding would mean for my specific situation - which was basically nothing since my account didn't earn significant interest. They also guided me through the correction process with my bank. Their document analysis saved me so much stress because I could see exactly which parts of my banking agreement were relevant to my situation instead of wading through generic advice online. The best part was getting personalized guidance without having to wait on hold with the IRS.

I was really skeptical about taxr.ai when I first read about it here, but I decided to give it a try with my backup withholding issue since I was getting nowhere with my bank. Gotta admit I was wrong - it was actually super helpful. I uploaded my account documents and some IRS notices I had received, and it immediately identified that my issue wasn't just about the backup withholding checkbox but also related to a missing 1099-INT from 2 years ago that I never reported. That was apparently what triggered the whole situation. The document analysis showed me exactly which paragraph in my bank's terms applied to my situation, and explained what I needed to do to resolve both issues. Saved me from making another mistake on the correction forms. Now everything's sorted and my new accounts are set up correctly. Wish I'd known about this sooner!

If you're still having issues after submitting the W-9, you might want to try Claimyr to actually speak with someone at the IRS. I was in a similar situation last year where I needed to verify my backup withholding status directly with the IRS, but couldn't get through on the phone for weeks. A colleague recommended https://claimyr.com and I was honestly shocked at how well it worked. They have this system that navigates the IRS phone tree for you and holds your place in line. When an agent is available, they call you back. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was able to speak with an actual IRS representative within hours instead of days, and got official confirmation that I wasn't subject to backup withholding. Having that confirmation made dealing with my bank much easier - they immediately processed my correction instead of making me wait the full 14 days.

I need to admit I was wrong about Claimyr. After posting my skeptical comment, I actually went to their site just to see what it was about and decided to give it a try since I'd been trying to reach the IRS about a backup withholding issue for weeks. The service actually works exactly as described. I got a call back about 90 minutes after signing up, and it connected me directly to an IRS agent who was able to confirm that there was no backup withholding requirement on my account. The agent even sent me a letter confirming this that I could show my bank. I was able to get my banking issue resolved the same day instead of waiting another 2 weeks for the W-9 processing. Sometimes being proved wrong is actually a good thing! Just wanted to follow up here in case anyone else is in a similar situation.

Just to add a practical suggestion - while you're waiting for the W-9 to process, you could have your uncle deposit just a small amount first (like $100) to see how the bank handles it. If that goes through without any issues, then it's probably safe to deposit the rest. Also, check your bank's funds availability policy. Most banks will place a hold on check deposits for new accounts anyway (usually 5-7 business days), regardless of backup withholding status. So there might be a holding period for the check portion of the deposits either way.

Quick question - anyone know if the backup withholding mistake will show up on any credit reports or cause any issues with opening other financial accounts? My cousin had something similar happen and he said it caused problems when he tried to open an investment account later.

I went through something very similar about 6 months ago when I accidentally checked the wrong box on a savings account application. The anxiety was real, but it turned out to be much less of a big deal than I thought. Your uncle should be fine to make his deposits. The backup withholding flag only affects payments FROM the bank to your uncle (like interest earned), not deposits he makes INTO the account. Regular cash and check deposits will be processed normally according to the bank's standard policies. The 24% withholding rate that everyone mentions only applies to taxable payments like interest or dividends. Since most checking accounts earn practically nothing in interest anyway, the real-world impact is minimal even if it takes the full 14 days to correct. One thing that helped me was getting written confirmation from the bank about their policy regarding deposits for accounts flagged for backup withholding. Most customer service reps can email you their standard procedure, which might give your uncle some peace of mind while waiting for the W-9 to process.

I actually work in banking compliance and can offer some reassurance here. The backup withholding flag is purely a tax reporting setting in the account system - it doesn't trigger any deposit restrictions, account freezes, or unusual review processes. Your uncle's deposits will be processed exactly the same as any other new account. The confusion often comes from people thinking backup withholding affects all account activity, but it's specifically limited to interest, dividends, and certain other payments the bank makes to the account holder. Regular deposits (cash, checks, ACH transfers, etc.) flow through completely different systems that don't interact with the backup withholding flag. Since you've already submitted the corrected W-9, you've done everything right. The 14-day processing time is standard, but honestly, for a checking account that likely earns minimal interest, the practical difference between now and when it's corrected is essentially zero. Your uncle should feel confident making his deposits - the cash will be available immediately per normal policy, and the checks will follow the bank's standard funds availability schedule for new accounts (typically 1-2 business days for the first $200, then 5-7 business days for the remainder).

I'm dealing with a very similar situation right now! I accidentally marked "yes" for backup withholding when helping my elderly neighbor open a new account last week. The panic was real when I realized what I'd done. From my research and calls with the bank, I can confirm what others have said - the deposits themselves aren't affected. The backup withholding only applies to interest payments, not the money you're putting into the account. My neighbor has been making regular deposits while we wait for the W-9 correction to process, and everything has gone smoothly. One thing that really helped was asking the bank representative to walk me through exactly what would happen with each type of transaction. They confirmed that cash deposits are available immediately, check deposits follow their normal new account hold policy (which was 7 days for amounts over $200), and debit card transactions work normally from day one. The 14-day processing time seems to be pretty standard across banks. We're on day 8 now and haven't had any issues. Your uncle should definitely feel comfortable making those deposits - the backup withholding mistake is more of a paperwork inconvenience than an actual barrier to using the account.