Taxpayer asks:
I have a Q. We run a large tow truck company. We tow for the Police, Sheriff, and Highway Patrol, as well as Federal Military Police. We also take private callers with disabled vehicles. We do our taxes every year with our CPA.
We received an emergency call in January. It was a construction company that their truck had been run off the road by a vehicle going the wrong way. We responded, as we usually do,and pulled this truck back on the highway….A recovery situation. Normally, we impound the vehicles until payment is made. However, this time, the vehicle was running OK, and the driver iof the recovered vehicle wanted to drive away. He gave us a PO from his established company. We trusted the large company.
Then, they refused to pay us the $300 for tow services unless we filled outa W-9. As a matter of principle, I refused to submit my SSN or Federal ID, as recommended by my CPA. It was like extortion. I threatened to turn them into collections,. Now the company has told me they reported me to the IRS for failure to fill out a W-9.
I am not an independent contractor. We do not contract with them. This is the one and only time they called us to respond to this emergency call. I already prepare my taxes every year with a CPA. What is going on here? Do I have to worry? When you go to the store to buy groceries, you don’t force the market to fill out a W-9? We are no different. We are an established business.
Thank you.
Taxgirl says:
Based on these facts, I’m guessing that the company does not have to file a form 1099 for money paid to your company. That would mean that they don’t need you to complete a form W-9.
I’m also guessing however, that this “big company” routinely issues forms W-9 as a matter of practice. This is because companies who fail to obtain a proper tax ID number when it’s actually required can be subject to a fine. So, as a matter of course, many of those companies issue a form W-9 to every vendor to cover themselves. Most of the time, I advise my clients to complete the form to avoid the agita. Rarely does anything come of it.
That said, I appreciate that you feel that you didn’t have to complete the form and that you should be paid for the work that you’ve done. If you insist on not completing the form W-9, I would ask your CPA (or attorney) to send a letter to the company asking why they believe it is necessary for you to complete one and note that in the absence of a valid reason, you expect to be paid promptly. My guess is that there is no valid reason. And in the absence of a valid reason, there’s no harm, no foul on the IRS side for not completing the form (the form itself doesn’t get sent to the IRS).
But one more word of advice: I highly recommend doing a quick cost analysis. The cost to you – in fees and time – to get paid for the time that you’ve already expended providing a service is probably more than the payments due you. In situations like this, as sucky as it is, I usually advise my clients to bite the bullet, fill out the form and call it a day. And maybe next time, let ‘em sit by the side of the road for a bit… 
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
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Some financial institutions send out W-9 forms periodically to make sure that they have the correct SSN or EIN for a customer. I’ve had clients throw them away because the SSN listed is correct. The next thing you know the institution is collecting federal backup withholding – by taking money from the dividends and interest they earn with the institution.
You shouldn’t ignore those W-9 forms. I don’t understand why the CPA advised this person not to complete them.
I agree with Mary Kay. We usually demand that we get their tax id also. We are just a bit softer, however. If the payment that is less than $600.00, we will pay them, but tell them we will not do any more business with them unless we get their tax id number. Honest Americans who file their tax returns should not care if it is reported to the IRS, as they will report it as income. My feeling is that anyone who is afraid to fill out the w-9 or won’t supply their tax id number probably isn’t reporting the income. Then, if we get audited, we get penalized for either not getting a tax id number, or not reporting the income on a 1099. Not worth it to me. We can usually find someone else to do the job for us.
I agree that there are many “tax dodgers” who won’t supply their tax ID number because they hope to avoid reporting.
But I think what this taxpayer is complaining about – and it’s something that many of my corporate clients have increasing been concerned about – is the failure to release payment even when forms W-9 are not required. There is nothing in this fact pattern that leads me to believe that a form 1099 would have been issued (esp to a corporate taxpayer). In that instance, the payor should have paid up without making noise.