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Form W-9 | Tax Information Reporting Skip to main content

If I have a vendor that is an LLC but either S-Corp or C-Corp, do you need to send them a 1099?

Question

If I have a vendor that is an LLC but either S-Corp or C-Corp, do you need to send them a 1099?

Answer

Making payments to LLC's is always tricky. In large part this is because such organizations can take any number of forms (for tax purposes).

As such, let's get to your question and provide the answer you need.

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When Can We Discontinue Backup Withholding?

Question

When completing a W-9 form, the instructions state that a payee "must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return...".  As the payor, I assume this means that if item 2 is crossed out, we should backup withhold on the dividends on that account.  If this is true, what would allow us to discontinue the backup withholding?  When the notice to withhold is received from the IRS, we require notice from the IRS to discontinue it.  When the notice is received from the payee, I am unclear as to how exactly that should be handled.

Answer

You must be careful when it comes to stopping backup withholding. Particularly in situations like these.

Here is what you should do.

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Are we required to obtain the newest revised Form W-9 from our Vendors at the time of payment?

Question

The IRS released their revised Form W-9 to expand the exemptions box on the front of the form to incl. entry for the Exempt Payee code and exemption from FATCA reporting code. Currently we requesting the new revised Form W-9 when it is a new Vendor set up, Name and/or TIN change. Are we required to obtain the new revised Form W-9 from our Vendors at the time of payment?

"Exemption from FATCA code (if any)" - per Form W-9 general instuctions "The following codes identify payees that are exempt from reporting under FATCA" ... you may leave it blank.

What do I do when a US Person completes or doesn't complete the "Exemption from FATCA code"? What is the best practice? Should we require to have this completed by all US Persons? If so, should we note this code in the Vendor Master for future audit or reporting?

Answer

Of course the IRS has regularly revised the W-9 and will continue to do so. As part of your due diligence and compliance activities you must respond. In this case and in answer to your questions here is what you need to know.

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How do I pay and 1099 report when the payee completes the W-9 with their name, business name, and social security number?

Question

When a W-9 comes in and it has a persons name on line 1  with their social security number on it but the W-9 has a business name on line 2 and the invoice we recieve is for the buisness name, who should we make the check out to?  The business name or the individual?  We are purchasing items from them so the company is not providing us a service.

Answer

Validating Forms W-9 when they involve sole proprietor's or single member LLC's easily ranks as one of the more complicated compliance tasks you face. However, you must get it right. Here is what you need to know to do exactly that (and the answers to your questions).

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Do We Need to Get Completed W-9's From Our Payees?

Question

We're rolling out a suppliers' self-service portal.  Among other things, our suppliers will be logging our secure Oracle solution to update their federal tax identification number, business address, bank account information, etc.  We would like to eliminate the collection and retention of form IRS W-9, since the suppliers themselves will be certifying on the validity and accuracy of the information they provide to us. 

Is it an IRS requirement for most payees to collect and retain IRS W-9 forms, keep them in paper or electronic format for future evidence? 

Or, can we stop requesting IRS W-9 forms from those suppliers who enroll and become certified suppliers within our Oracle supplier portal?

Answer

There is no IRS requirement that payee have to collect and retain Forms W-9.

However, there are a number of steps the IRS requires you to take from a due diligence/compliance perspective. So let's discuss what you need to know and do.

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If a Vendor Marks Disregarded Entity on the Form W-9 Are They Exempt From Reporting?

Question

When a vendor marks a W9 as an LLC and then puts in the D for Disregarded Entity, are they exempt from 1099 reporting?

Answer

When dealing with single-member LLCs (also known as disregarded entities, owned by an individual), there are a number of issues.

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What to do When Payee Trying to Avoid IRS Levies By Changing W-9 Information?

Question

We have been paying an on-call physician under contract for services performed and issuing Form 1099-MISC to him annually under his individual name and corresponding SSN.  We have recently received 2 IRS levies on this individual and have remitted monies to the IRS for services performed but not paid as of the date of the receipt of the levies.  The physician now wants to redo his on-call contract to change the name from his individual name and SSN to a business name with an associated EIN in order to avoid future levies against him individually.  Are there any potential problems with us agreeing to do this?

Answer

An IRS Levy can only end for three reasons:

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What Lines on the Form W-9 Do We Use for DBA name's?

Question

We have a very large vendor database where the DBA's were placed on the first line and the individuals' name on the second line ---these were our instructions in prior years. They have not kicked out for B-Notice purposes ---should we be concerned about this and work on changing these or since we have not had any problems - are they OK as is?

Answer

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Paying a Claimant for Lost Wages Due to Insured's Negligence: Which Form Do We Use to Report?

Question

In the course of handling a claim file, there is occasionally a need to pay the claimant for lost wages due to our insured's negligence.  I believe these wages need to be reported on a 1099 Misc.  Where in in the IRS regulations is that indicated?

Answer

You specifically mention "wages". As such, our assumption is that you are dealing with a current/former employee. Please let us know if that is not the case, but assuming that it is then here's how to proceed.

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Do Non-Profit organizations have the same Form 1099 reporting and compliance rules and regulations to follow as does everyone else?

Question

Do Non-Profit organizations have the same rules and regulations to follow as far as collecting W9 information and issuing 1099's to individuals and businesses that they pay over $600.00 in a calendar year?  If the Non-profit pays to individuals cash for events they win or awards for winning is that 1099 reportable?

Can you recommend what IRS publications would be benefical to read regarding Non-Profit organizations and taxes.

Answer

Non-profits are unique in many ways. What's more how they are treated varies from how they are to treat their payees. Thus in approaching the issue you will want to exercise caution. Luckily, there are a number of ways to move forward.

Bottom line - here is how IRS reporting applies to non-profits...

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