Am I required to complete Form W-9?

Am I required to complete Form W-9

Why is my customer asking for a W-9 form?

Companies that make payments in the normal course of their business are required to report certain payments to both the IRS and to the person or entity paid at the end of each calendar year.  This is typically done using Form 1099.  The IRS calls this requirement “Information Reporting” and the process is similar to the way that employers report wages paid to employees on Form W-2.

When the payment for a product or service is required to be reported to the IRS on Form 1099, your customer is required to ask for your taxpayer identification number (TIN).  Your unique TIN is the way the IRS identifies you in its records.  A TIN is typically either your personal social security number (SSN) or an employer identification number (EIN).

When the IRS receives the payment information on Form 1099 they compare that information to the income that you reported on your income tax return.  If the income that your report on your tax return does not include all the payments reported on all Form 1099s received by the IRS, your return could be red-flagged.  The IRS could then take steps to determine why all income earned was not reported.

The consequence of not submitting a W-9

If you do not provide your TIN number to your customer when requested, the customer will not be able to specifically report your income on Form 1099.  The IRS will then require your customer to reduce all payments to you by 24% and remit this amount to the IRS on Form 945.   (See our blog article on backup withholding).

The IRS will hold your customer personally responsible for this 24% if they don’t obtain the TIN number or withhold the required amount.  Additional penalties and interest could also be assessed in addition to the 24% in backup withholding.  Therefore, most companies put procedures in place to obtain all their vendor’s TIN numbers in advance of making any payment.  Requesting Form W-9 to be completed is the standard process that the IRS has created for payers to obtain the TIN number.

CONCLUSION:  Vendors are not required to submit a Form W-9, however, the likely result would be a 24% reduction in payments to them by their customers.  This is from the IRS’s backup withholding regulation.  Therefore, when required to complete your W-9 form, it is advised to provide it to your customer. 

Examples of information returns

Examples of information returns that use information from Form W-9 include, but are not limited to, the following:

    • Form 1099-INT (interest earned or paid)
    • Form 1099-DIV (dividends, including those from stocks or mutual funds)
    • Form 1099-MISC (various types of income, prizes, awards, or gross proceeds)
    • Form 1099-B (stock or mutual fund sales and certain other transactions by brokers)
    • Form 1099-S (proceeds from real estate transactions)
    • Form 1099-K (merchant card and third-party network transaction)
    • Form 1098 (home mortgage interest), 1098-E (student loan interest), 1098-T (tuition)
    • Form 1099-C (canceled debt)
    • Form 1099-A (acquisition or abandonment of secured property)

Use Form W-9 only if you are a U.S. person (including a resident alien), to provide your correct TIN.

Use W9manager’s guided process to create your W-9

Why go through the hassle and uncertainty of creating and sending a paper W-9 form.  Use W9manager’s guided step-by-step process to help create the most correct and complete W-9 form.   It is always free to create and send your W-9 form.  W9manager is not just another blank PDF form site.  Every step of the way has contextual help buttons tailored to your specific circumstance.  The W-9 form is then electronically signed and sent securely sent to the requester.

You can then store your W-9 form centrally using W9manager.  Log into your account later and send it as needed.  If you need to create multiple W-9s for more than one company or individual, W9manager allows you to create multiple companies to manage them separately.  Finally, you can also use your mobile phone to send your W-9 from anywhere, to anyone, at any time.

Create and send your W-9 form with W9manager today!

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.