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A business is required to obtain a taxpayer identification number (TIN) from any vendor to whom it makes payments that require the issuance of a Form 1099-MISC. A Form W-9 facilitates obtaining this information.
When you pay $600 or more to a vendor for services, and that vendor is not a corporation, you are required to issue Form 1099-MISC. Which of course, The office of Theresa D. Props, CPA does for you. This is an information return used to report the total paid to that vendor for the year to the IRS. When you file a Form 1099-MISC, you must provide the name and TIN along with the amount paid. You can be subject to severe penalties for filing Form 1099 with missing or incorrect information.
Form W-9 is used to request a taxpayer's TIN. On Form W-9, the vendor identifies the type of organization and provides the legal name and matching TIN. It is a good idea to have this form on file as proof that you sent information to the IRS as it was provided to you by the vendor. Also, since you are not required to file a Form 1099-MISC for payments to corporations, this form provides proof that you were told the vendor was a corporation.
When Form W-9 Is Required
If you file a Form 1099-MISC and the IRS determines that there is missing or incorrect information, you will receive a Notice CP2100 or CP2100A. If it is your first notice for a particular vendor, you are required to send the vendor a "B" Notice or backup withholding notice along with a Form W-9 to attempt to obtain the correct information. If the vendor does not respond within 30 days, you are required to start backup withholding of 28 percent from payments to the vendor until it supplies the correct information. You submit the amounts withheld to the IRS.
If a vendor refuses to provide you with its TIN, you must begin backup withholding of 28 percent of any payments made to that vendor until the vendor provides you with a Form W-9 and the missing information. You can be subject to severe penalties for failing to withhold and submit backup withholding.
Who needs to fill out IRS tax form W-9?