Do I have to request a W-9 from a corporation?

Do I have to request Form W-9 from a corporation?

Summary

The Internal Revenue Code (IRC) states that payments to corporations generally do not have to be reported on an information return like Form 1099-MISC.   See Are payments to corporations reportable on a 1099-MISC form? for a discussion of exceptions.  The IRC goes on to state that you may treat a corporation as an exempt recipient (generally exempt from information reporting or receiving Form 1099-MISC) if one of the following indicators is met to identify the entity as a corporation.

  1. A Form W-9 is received which includes an EIN and a statement from the payee that it is a domestic corporation.
  2. You have on file a domestic corporate resolution or similar document clearly indicating corporate status.
  3. The name of the corporation contains an unambiguous expression of corporate status that is Incorporated, Inc., Corporation, Corp., P.C., (but not Company or Co.) or contains the term insurance company, indemnity company, reinsurance company, or assurance company.

There are two ways in practice that accounting departments comply with these indicators so they are not required to obtain Form W-9.  The first step is to look for Inc. or similar terminology on a company’s website, invoice, contract or other document.  The second step is to go to the Secretary of State’s website, complete a business search for the company name and download the Certificate of Incorporation for companies that are a corporation.  If you can determine that an entity is a corporation from one of these two indicators and has no reportable payments (for example, medical or attorney payments) you do not have to request Form W-9.   Please note that foreign corporations are outside the scope of this discussion.

The Long Answer

Internal Revenue Code section 1.6041-3 details payments for which no return of information is required under section 6041.  Paragraph (p)(1) of this section states that an information return is not required for payments made to “a corporation described in section 1.6049-4(c)(1)(ii).”  See Are payments to corporations reportable on a 1099-MISC form? for a discussion of exceptions.

Section 1.6049-4(c)(1)(ii)(A) listed below states that a payer may treat a corporation as an exempt recipient (who is generally exempt from information reporting) based on a properly completed Form W-9 or one of the indicators described in paragraph (c)(1)(ii)(A).

There are two ways in practice that accounting departments comply with these indicators so they are not required to obtain Form W-9.  The first step is to look for Inc. or similar terminology on a company’s website, invoice, contract or other document.  The second step is to go to the Secretary of State’s website, complete a business search for the company name and download the Certificate of Incorporation for companies that are a corporation.  If you can determine that an entity is a corporation from one of these two indicators and has no reportable payments (for example, medical or attorney payments) you do not have to request Form W-9.   Please note that foreign corporations are outside the scope of this discussion.

IRC Section 1.6049-4(c)(1)(ii)(A)

(ii) Exempt recipient defined. The term exempt recipient means any person described in paragraphs (c)(1)(ii)(A) through (Q) of this section. An exempt recipient is generally exempt from information reporting without filing a certificate claiming exempt status unless the provisions of this paragraph (c)(1)(ii) require a payee to file a certificate.

A payor may, in any case, require a payee that is a U.S. person not otherwise required to file a certificate under this paragraph (c)(1)(ii) to file a certificate in order to qualify as an exempt recipient. See § 31.3406(h)-3(a)(1)(iii) and (c)(2) of this chapter for the certificate that a payee that is a U.S. person must provide when a payor requires the certificate to treat the payee as an exempt recipient under this paragraph (c)(1)(ii). A payor may treat a payee as an exempt recipient based upon a properly completed form as described in § 31.3406(h)-3(e)(2) of this chapter, its actual knowledge that the payee is a person described in this paragraph (c)(1)(ii), or the indicators described in this paragraph (c)(1)(ii).

(A) Corporation. A corporation, as defined in section 7701(a)(3), whether domestic or foreign, is an exempt recipient. In addition, for purposes of this paragraph (c)(1), the term corporation includes a partnership all of whose members are corporations described in this paragraph (c)(1), but only if the partnership files with the payor a certificate stating that each member of the partnership meets one of the requirements of paragraph (c)(1)(ii)(A) (1) through (4) of this section. Absent actual knowledge otherwise, a payor may treat a payee as a corporation (and, therefore, as an exempt recipient) if one of the requirements of paragraph (c)(1)(ii)(A) (1), (2), (3), or (4), of this section are met before a payment is made.

(1) The name of the payee contains an unambiguous expression of corporate status that is Incorporated, Inc., Corporation, Corp., P.C., (but not Company or Co.) or contains the term insurance company, indemnity company, reinsurance company, or assurance company, or its name indicates that it is an entity listed as a per se corporation under § 301.7701-2(b)(8)(i) of this chapter.

(2) The payor has on file a corporate resolution or similar document clearly indicating corporate status. For this purpose, a similar document includes a copy of Form 8832, filed by the entity to elect classification as an association under § 301.7701-3(b) of this chapter.

(3) The payor receives a Form W-9 which includes an EIN and a statement from the payee that it is a domestic corporation.

(4) The payor receives a withholding certificate described in § 1.1441-1(e)(2)(i), that includes a certification that the person whose name is on the certificate is a foreign corporation.

Disclaimer – Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.

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