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Can you find your signed Form W-9’s? If not, it could cost you 28% of amounts paid!

The government accounting office believes that there is over $300 billion of tax due every year that does not get collected. For many years businesses have been required to have a Form W-9 on hand or they are supposed to withhold tax currently at a 28% rate. The GAO believes that a large portion of this could be easily recovered if businesses issued all the 1099’s that they are required to report. With the upcoming changes to the 1099 reporting requirements, where all entities, including corporations, will receive a 1099 not only for services, but for goods too, a completed Form W-9 is even more of a necessity from every vendor and service provider you pay. It will become key for businesses in completing accurate and timely 1099 Forms.

A W-9 Form is used to request the taxpayer identification number (TIN) for a U.S. person, so that the person can verify certain certifications and request claims for exemption. For federal tax purposes, a U.S. person is:

• an individual who is a U.S. citizen or resident alien
• a partnership, corporation, company of association created or organized in the United States or under the laws of the United States
• any estate (excluding foreign estates), or
• a domestic trust.

The W-9 certifies that the person or business listed on the W-9 is a U.S. person, that they are not subject to backup withholding and that the TIN listed is correct. The person or business then signs the W-9 under penalties of perjury that the information contained therein is correct. A requestor can reasonably rely on the information contained in the W-9 when determining whether to backup withhold or not.

If the person or entity does not provide a completed and signed W-9, including a TIN, then backup withholding of 28% must apply unless the payee is an organization exempt under 501(a) or one of the other payees listed on the Instructions to Form W-9 (available on the IRS website, www.irs.gov). Additionally, the IRS provides TIN Matching on their website so businesses can help avoid backup withholding and penalty notices. Most penalties will relate to the failure to backup withhold when required.

With the Internal Revenue Service conducting more payroll audits you want to make sure you have all the proper documentation in your files. Now is the time to begin making sure that you do have that documentation for all persons and business with whom you do business.  It is best practices to have a completed and signed W-9 on file before making any payments to vendors or service providers.

For additional information on W-9 Forms please contact contact Kim Haumann at 312-980-3249, or your Blackman Kallick representative.

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.