[NA]IRS Form W-9: Why am I being asked to fill one out

AggieMike88

AggieMike88

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The original "I don't know it all" of aviation.
As most of you know, I'm part of a family business that sells recycled auto parts.

Lately, many of my larger customers are getting insistent on my providing them a IRS Form W-9. But I really don't understand why they are compelled to collect them.

Any one able to enlighten me?

And suppliers/vendors are getting on that bandwagon too... :confused:
 
Federal Law.

An individual or entity (Form W-9 requester) who is required to file an information return with the IRS must obtain your correct taxpayer identification number (TIN) which may be your social security number (SSN), individual taxpayer identification number (ITIN), adoption taxpayer identification number (ATIN), or employer identification number (EIN), to report on an information return the amount paid to you, or other amount reportable on an information return.
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Basically so the IRS knows whether or not payments to you/business are subject to withholding/taxes.

By signing the filled-out form, you:
1. Certify that the TIN you are giving is correct (or you are waiting for a number to be issued),
2. Certify that you are not subject to backup withholding, or
3. Claim exemption from backup withholding if you are a U.S. exempt payee. If applicable, you are also certifying that as a U.S. person, your allocable share of any partnership income from a U.S. trade or business is not subject to the withholding tax on foreign partners' share of effectively connected income, and
4. Certify that FATCA code(s) entered on this form (if any) indicating that you are exempt from the FATCA reporting, is correct.
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Elections have consequences.

Previous post answered better than I did.

I think it's because some of your larger customers are using you as a vendor, and for them they might have to report you as a "contractor". They need to report anything paid in excess of $600. Your taxpayer ID gives them a chance to report to the IRS that payment, then IRS can follow where it went and can make sure taxes were paid on it.
http://www.investopedia.com/articles/personal-finance/082714/purpose-w9-form.asp
 
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This is another reason why I blame the explosion in identity theft 99.47 percent on the government.

Rich
 
Matthew said:
Elections have consequences.

Previous post answered better than I did.

I think it's because some of your larger customers are using you as a vendor, and for them they might have to report you as a "contractor". They need to report anything paid in excess of $600.
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For all of these "customers", I believe being called a vendor to them is an accurate name.

Many of the requestors are auto dealerships, the larger collision repair chains, and many of the 5+ bay mechnaical repairers. Getting above $600 of sales to each one can happen in a single invoice.


Your taxpayer ID gives them a chance to report to the IRS that payment, then IRS can follow where it went and can make sure taxes were paid on it
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This is the part that is gonna win the stump the chump round. But I guess I'll leave that to the CPA.
 
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AggieMike88 said:
For all of these "customers", I believe being called a vendor to them is an accurate name.

Many of the requestors are auto dealerships, the larger collision repair chains, and many of the 5+ bay mechnaical repairers. Getting above $600 of sales to each one can happen in a single invoice.




This is the part that is gonna win the stump the chump round. But I guess I'll leave that to the CPA.
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The CPAs of the world can figure it out. I don't think it's anything you need to worry about, I think it's on your customers. They are using you for your services but you aren't an employee so they won't be withholding any taxes. The W9 goes to them, not the IRS, for their payroll records so they can show they weren't required to withhold on payments to you. If they get audited, IRS can see who they paid, and possibly follow the money to make sure it was reported as income by the vendor/contractor. And yeah, $600 is a pretty low threshold.

http://www.irs.com/articles/fill-out-irs-tax-form-w-9
 
RJM62 said:
This is another reason why I blame the explosion in identity theft 99.47 percent on the government.

Rich
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I agree completely. I shudder at this thought, but for the first 10 years in my career, I had to put my social security number on every return that I signed as a preparer.

Then some genius figured out that wasn't a great idea, and the IRS issued us Preparer Tax ID numbers. Of course, a few years later some genius thought that I should pay for my PTIN, so now I have to pay the IRS something like $68 per year for my PTIN.

:mad:
 
It used to only be required of individuals. Now it is technically required for all vendors.
 
The IRS figures we're not busy enough so they make us fill out a bunch more forms just to waste our time.

Maybe it's a stimulus package for CPAs.
 
I suspect your customers may not know when they really need to file a 1099, or their accountant asked them to get W-9 info from everybody, regardless:

http://www.irs.gov/instructions/i1099msc/ar02.html
Exceptions. Some payments do not have to be reported on Form 1099-MISC, although they may be taxable to the recipient. Payments for which a Form 1099-MISC is not required include all of the following.

Generally, payments to a corporation (including a limited liability company (LLC) that is treated as a C- or S-Corporation). But see Reportable payments to corporations, later.

Payments for merchandise, telegrams, telephone, freight, storage, and similar items.

Payments of rent to real estate agents. But the real estate agent must use Form 1099-MISC to report the rent paid over to the property owner. See Regulations section 1.6041-1(e)(5), Example 5, and the instructions for box 1.

Wages paid to employees (report on Form W-2, Wage and Tax Statement).

Military differential wage payments made to employees while they are on active duty in the Armed Forces or other uniformed services (report on Form W-2).

Business travel allowances paid to employees (may be reportable on Form W-2).

Cost of current life insurance protection (report on Form W-2 or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.).

Payments to a tax-exempt organization including tax-exempt trusts (IRAs, HSAs, Archer MSAs, and Coverdell ESAs), the United States, a state, the District of Columbia, a U.S. possession, or a foreign government.

Payments made to or for homeowners from the HFA Hardest Hit Fund or the Emergency Homeowners' Loan Program or similar state program (report on Form 1098-MA).
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If they are only buying merchandise from you, or if you are providing services and are anything other than a sole-proprietor or LLC set up as a direct pass-through entity, they don't need your W-9 info.
 
cowman said:
The IRS figures we're not busy enough so they make us fill out a bunch more forms just to waste our time.



Maybe it's a stimulus package for CPAs.
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Most CPAs hate this stuff, and don't make much money on it except for the small CPA firms that work with very small businesses.

All of my clients take care of these forms internally.
 
register@teamandras.com said:
I believe that it's simply so that they can comply with their perceived obligation to report payments to you on a Form 1099-MISC:

http://www.irs.gov/Businesses/Small...-Associated-Taxes-for-Independent-Contractors

It seems to me that the sum of the payments reported to the IRS on Form 1099-MISC put a floor on somebody's reported income. Keeps everybody honest I guess.
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Yup...

Line 7 is there to feed the feds info on all your business relationships....:mad2::mad2::mad:
 
I inform my clients to either get a W9 or a written signed statement that the vendor is a corporation.
 
asgcpa said:
I inform my clients to either get a W9 or a written signed statement that the vendor is a corporation.
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But if you have receipts showing you're only purchasing merchandise, even that shouldn't be needed.
 
Matthew said:
The CPAs of the world can figure it out. I don't think it's anything you need to worry about, I think it's on your customers. They are using you for your services but you aren't an employee so they won't be withholding any taxes. The W9 goes to them, not the IRS, for their payroll records so they can show they weren't required to withhold on payments to you. If they get audited, IRS can see who they paid, and possibly follow the money to make sure it was reported as income by the vendor/contractor. And yeah, $600 is a pretty low threshold.

http://www.irs.com/articles/fill-out-irs-tax-form-w-9
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And the net result is to run up the costs of you and every other small business. The overall cost is probably more than they'll raise for the Uncle, though they will have done a cost-benefit analysis that purports otherwise.
 
wsuffa said:
And the net result is to run up the costs of you and every other small business. The overall cost is probably more than they'll raise for the Uncle, though they will have done a cost-benefit analysis that purports otherwise.
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And.....

Nothing scares a CPA more the a flat tax...:eek::yikes:......;)
 
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