Although corporations are exempt from receiving a 1099-MISC on most payments, it is a best practice to get a W-9 for several reasons.
1. Some payments to corporations are reportable.
- Medical and health care payments
- Fish purchases you make for cash
- Attorney’s fees
- Gross proceeds paid to an attorney
- Substitute payments you make to a vendor in lieu of dividends or tax-exempt interest
- Payments by a federal executive agency for services (this only applies to you if you are a federal executive agency.
2. Many LLCs think they are a corporation. You could incur substantial liability if you exempt an LLC when they are actually reportable. If you don’t backup withhold 24% of all the payments to a vendor when required your company could be responsible for paying the full 24%.
3. It can help you identify foreign corporations. Payments to foreign corporations could be subject to FATCA regulation or 1042 reporting.