Top 5 mistakes made on W-9 forms

Avoid the biggest mistakes made on Form W-9

I’ve been a CPA for over 20 years now and have seen mistakes on W-9 forms every one of those years.  It seems like a simple form at first glance, but the W-9 form itself has 6 pages of instructions with almost 6,000 words.  Behind those condensed instructions on the W-9 form is a massive set of IRS tax code regulations.  Helping vendors and independent contractors create a correct and complete W-9 form is one of the reasons we started W9manager.

#5 – The name on line 1 of the W-9 form is blank

At times vendors can become confused between the names on line 1 and line 2.  They can mistakenly fill in only the business name on line 2 and leave line 1 blank.  Line 1 is the legal name that the business or individual uses on their federal tax return and is required by the IRS.  It is imperative that the name on Line 1 and the taxpayer identification number (typically an EIN or SSN) given on the W-9 form match to the IRS’s records. This will ensure that the IRS can apply any 1099 information received to the correct taxpayer account.  If they don’t match, the IRS won’t have confidence in the information provided and will send an error notice back to the reporting company.  This could lead to a 24% deduction in the vendor’s payment moving forward to satisfy IRS backup withholding requirements.

When using our guided form in W9manager, the user is required to complete line 1.  It is a required field and the user cannot continue to the next section until complete.

#4 – The W-9 form is not signed

Not all W-9 forms are required to be signed, but the best practice is to require that all vendors sign them unless the company understands all the situations in which a signature is required.  Vendors send in W-9s that aren’t signed and the accounting department at the company receiving the W-9 doesn’t always check for this.

When using our guided process in W9manager, a signature can be required when a W-9 form is sent to your vendor. As an added benefit, one user can complete the W-9 form and then send it to another user to sign.

#3 – The tax classification is not checked

Another mistake we see is a W-9 form without any tax classification checked. Line 3 of the form requires that the person completing the form check the appropriate box for the federal tax classification of the entity or person noted on line 1. This helps the company making the payment to the vendor determine if the payment is reportable on a 1099 form. Without this information, the company will have to assume a 1099 is required for all reportable payments made to the vendor. They won’t be able to exclude entities, like corporations, that are often exempt from receiving 1099s.

The first step users must do when creating a W-9 form in W9manager is to select their tax classification. They are not able to move to the next step without selecting a valid option.

#2 – Disregarded entity used on line 1 of the W-9 form

One of the most misunderstood concepts of the W-9 form is a disregarded entity. And consequently, because companies don’t understand this concept, listing the disregarded entity on line 1 is one of the biggest mistakes made on W-9 forms. When the disregarded entity name and TIN is then reported on a 1099 it can lead to the reporting company receiving a large number of CP2100 notices from the IRS.  These notices require the company to request a new corrected W-9 form from their vendor or start backup withholding 24% on the vendor’s future payments.

A disregarded entity is an entity that the IRS “disregards” for tax purposes or completely ignores. The IRS looks to the owner of the entity and all the tax liability flows to the owner of the entity. The best example is an LLC that is owned by one individual. The IRS “disregards” the LLC and requires that the individual owner’s information be provided on the W-9 form. For more information on disregarded entities, see our blog article, What is a Disregarded Entity?

When creating an electronic W-9 on W9manager users work through a multistep process to determine if they are a single-member LLC.  If they determine that this is the case, W9manager directs them to use the owner of the LLC on the W-9 form.  This process helps to reduce the number of disregarded entities listed on line 1.

W-9 form mistake #1 – The type of limited liability company is not provided

The number one mistake we have seen vendors make on a W-9 forms is forgetting to include the type of LLC. This is critical as it determines whether the LLC can be treated like a C or S corporation for 1099 reporting purposes. Most payments made to C or S corporations are not required to be reported to the IRS on a 1099.   However, payments made to LLCs that are partnerships or owned by an individual person are often reported.

One of the steps that users are guided through when completing a W-9 on W9manager is to select the type of LLC that they have. We ask them if they have filled out Form 2253 or 8832 with the IRS to be taxed as an S Corp or C Corp. If they select one of these options, we note their LLC tax classification as S or C respectively. If they have not filed either form, we then ask them if they are a single or multi-member LLC.  Multi-member LLCs are treated as a partnership and single-member LLCs are asked to use the owner’s information.

Additional References

For additional help, see the Form W-9 and instructions.

Use W9manager’s guided process to create your W-9.  It’s always free!

W9manager.comIn conclusion, we feel that all of the top 5 mistakes made on W-9 forms can be avoided when creating a W-9 form using W9manager. 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.

2 Replies to “Top 5 mistakes made on W-9 forms”

  1. john,
    I ran into a problem and would like to get some advice or professional help that WE WOULD PAY FOR.
    My son started took on a new job and business in 2020 working as a contractor for a very big business and put in his personal social security number on the w-9 he was given at the start of job. We shortly thereafter formed a single member LLC / subchapter S and opened a business account tied to the corp EIN number. All business including paying subcontractors , providing end of year1099s , paying state sales taxes, payroll federal and state taxes , opening a profit sharing and depositing our revenue checks are thru the LLC bank account . No business was conducted through his personal bank accounts . Lastly, The name of the new company LLC had his personal name as the first 2 words in the LLC name so we deposited all the checks into his business account without issue.

    We recently received a 1099 from the big business with his social security number on it that they filed with the IRS…. We have asked the company to amend the 1099 to the EIN number but they refuse saying that we sent all the checks to your personal name and not to a corporation. Our big mistake was not filling out a new W-9 when we formed the LLC.

    The big companies accountants are saying they want justification by a CPA why they should amend? What to do??? Michael 347-582-6118

    1. Michael,

      It shouldn’t make a difference. If you have a U.S. single-member LLC that is owned by only your son and had not elected C or S-corp tax status, the IRS would require that he provide his name and SSN on the W-9 anyway. Single-member LLCs are disregarded by the IRS for tax purposes and the IRS requires the owner’s name, tax classification and TIN on the W-9 form.

      Here is some guidance from the W-9 form instructions:

      Line 1 b. Sole proprietor or single-member LLC. Enter your individual name as shown on your 1040/1040A/1040EZ on line 1. You may enter your business, trade, or “doing business as” (DBA) name on line 2

      Part 1: If you are a single-member LLC that is disregarded as an entity separate from its owner, enter the owner’s SSN (or EIN, if the owner has one). Do not enter the disregarded entity’s EIN. If the LLC is classified as a corporation or partnership, enter the entity’s EIN.

      I hope that helps!

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