Which Account is NOT Subject to Backup Withholding?

C

Backup withholding is a tax withholding method that requires payers, such as banks or employers, to withhold a certain percentage of payments made to a recipient and remit it to the IRS. Backup withholding is typically required when a recipient fails to provide a correct Taxpayer Identification Number (TIN) or when the IRS notifies the payer that the recipient is subject to backup withholding.

In the context of the question, the answer is D. A savings account owned by Karen Hitchings is not subject to backup withholding. The reason for this is that backup withholding is typically required when a recipient fails to provide a correct TIN, and savings accounts are not required to have TINs associated with them.

To further elaborate on the other answer options: A. A money market savings account owned by Brenda Wilson: Brenda Wilson's money market savings account may be subject to backup withholding if she fails to provide a correct TIN. However, if she has provided a correct TIN, then the account would not be subject to backup withholding. B. A time deposit account owned by Bob and Nancy Dawson: The answer to this option depends on whether Bob and Nancy Dawson have provided a correct TIN for the account. If they have not provided a correct TIN, then the account may be subject to backup withholding. C. An IRA owned by Max Jones: IRAs are generally not subject to backup withholding, but there are some exceptions. For example, if the IRA owner has taken an early withdrawal from the account, then backup withholding may apply to the distribution. However, if Max Jones has not taken an early withdrawal from the IRA, then the account would not be subject to backup withholding.

In summary, the only account that is not subject to backup withholding in this question is D. A savings account owned by Karen Hitchings.