Tax which is levied on the investment income, at a fixed tax rate, as the investor pulls it out. Backup withholding aids in ensuring that the government tax-collecting agencies ( such as the Canada Revenue Agency or IRS) can receive income taxes due from the earning of investors. Backup withholding is applicable once an investor didn't able to fulfill the rules concerning taxpayer identification number (TIN). Once the investor withdraws his/her investment income, the amount required by the backup withholding tax will be remitted to the government, giving the tax collecting body with the needed funds right away, but leaving leaving the investor with decreased short-term cash flow.