Why Form W-9 is Important

The Internal Revenue Service is increasing their efforts to ensure Forms 1099 are being filed as required.  In order to be in compliance with IRS regulations, you must file a Form 1099 for payments of $600 or more in a calendar year to all individuals, sole proprietorships, partnerships, and LLCs for rent, interest, dividends, royalties or services.  Entities that are incorporated, unless they are an attorney, are exempt from the 1099 filing requirements.  Purchases of tangible property such as inventory, fixed assets, office supplies, etc., are also exempt from the 1099 filing requirements. In order to file complete and accurate Forms 1099, certain information is required from your vendors and service providers, which includes their taxpayer identification number. 

Form W-9 is generally used to obtain all the necessary information from vendors and service providers. If the Recipient does not have a federal I.D. number, we recommend that you request the Recipient to apply for one. The federal I.D. number helps to protect you the payer from possible reclassification of an independent contractor to a company employee. If an independent contractor is reclassified to an employee, your company (the payer) is responsible for back taxes including penalties and interest on any payments made to the recipient. For more information on protection from reclassification please call us. If the Recipient has an ITIN (Individual Taxpayer Identification Number) please contact us for additional information. An ITIN will always begin with the number nine (ex. 989-99-7452). There are certain withholding and reporting requirements required specifically for Recipients with an ITIN. It is imperative that you obtain the necessary information.  Failure to file complete and accurate Forms 1099 on an annual basis could result in severe civil penalties assessed by the IRS.  We strongly encourage you to provide a Form W-9 and letter to all of your vendors and service providers to request the necessary information.  Continued contact with some may be necessary to obtain the Form W-9.  Please be persistent in obtaining the Forms W-9 from all of your vendors and service providers.

If you have any questions or need additional information, please contact us!

518 Arbor Hill Rd.

Kernersville, NC 27284

 Ph: 336-996-3338

 www.cpamcdaniel.com

IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication (or in any attachment).