In the early 80's Congress passed a law that required banks to withhold on all interest payments. The banking industry (and the general public) raised such a furor that it was repealed. Now, some banks do it voluntarily.
I understand rlcarey's repugnance at the idea and am thoroughly appalled that any bank would be pliable (there are more accurate adjectives) enough to amend prior withholdings and official reports at a customer's request.
Nevertheless, if your bank is going to serve as a customer's bookkeeper and voluntarily do the backup withholding I suggest you:
* get written, signed instructions,
* impose a significant annual fee,
* impose another fee for any change in the percentage requested and
* throttle anyone who thinks you are going to amend previous actions.
In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.