A certificate of deposit subject to Backup Withholding where accrued interest is paid/credited monthly.
For Backup Withholding, payments are considered made when a payment is credited (not accrued) to a payee’s account (whether or not withdrawn). So interest paid directly (like a paper check, or interest paid to a checking account) to the customer would be subject to the 24% held, or if the interest is credited to the customer’s same account, then 24% of the paid interest would be held.
The remaining 76% of interest would then be “compounded†and become the “new principalâ€.
For the 24% withheld, is interest paid on that amount, even though it has not been "released" to the customer? Is the 24% actually treated as paid interest for compounding?