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Ask the taxgirl: Can I refuse to complete a form W-9?

March 19, 2009 · 18 comments

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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{ 17 comments… read them below or add one }

1 Mary Kay Foss March 20, 2009 at 12:59 am

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.

2 Steve Welsch March 21, 2009 at 2:29 pm

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.

3 Kelly March 23, 2009 at 8:27 am

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.

4 Gary June 30, 2010 at 12:36 pm

I think she is saying because the amount is under $600 there is no requirement that the company needs a W-9. Until the vendor provides more than $600 of services, the vendor is under no responsibility to provide a W-9, and has every right to demand payment. Even if it is over $600 the customer must make payment; but they must hold taxes from the check until they receive the W-9. Not receiving a W-9 in no way gives a company the option of not paying for services.

5 Sarah December 13, 2010 at 10:15 am

All companies are not only permitted, but required to request a W-9 from a vendor, regardless of whether the current payment is less than $600 – in order to protect themselves, especially from any liability that might exist for backup withholding if the vendor owes the IRS money.
Furthermore, if you refuse to provide it, the company can legally withhold 28% backup withholding until you do.
Also, the company can (and should) still file a 1099 with your name and address, and then put in the taxpayer ID spot that you refused to provide it and attach documentation of that fact. By refusing, you may be subject to an additional $50 fine.
I am most concerned that someone claiming to be a CPA would encourage you to refuse a W-9. If you are incorporated, the 1099 doesn’t matter a single bit on your annual tax return or to the IRS at large. If it has the tax ID of the incorporated business on it, it is income that is considered as reported in your stated earnings, not “extra” – so it does not have any tax impact if your CPA knows how to properly do taxes – unless you are purposefully deflating your revenues to begin with, i.e. tax evasion. Which, by the way, is the most common reason people refuse to fill out a W-9. If the company is savvy enough to put on the 1099 form that you refused to fill out the W-9, the IRS will come knocking.
Just fill out the W-9! The only time I would advise against this is if a company that you are not doing business with asks for this information – this is a rare scheme, but it does happen. Make sure the company requesting the W-9 is someone you know you did business with and you have nothing to fear – as long as your being honest with the IRS already, that is.
Check Section 6109 of IRS code for your requirement to provide this info and Section 6041 for the requirements to request one.
Also, you should research some what the IRS is currently pushing for in the 1099 arena – they want big changes to 1099 reporting, they want to expand the tax base by making every one who is paid over $600 have a 1099 sent in, even entities formerly exempt from 1099 reporting – they are actively going after revenue they know has been under/not at all reported for years.
Again, best advice: just fill out the W-9. I understand if you’re under $600, you might feel you don’t have to, but it really doesn’t hurt you.
Refusals to follow the rule, especially if brought to the attention of the IRS, will only open you up to trouble far worse than filling out a simple form and paying tax on your true income.

6 G. Hodge January 12, 2011 at 9:30 am

We are a small Kitchen and Bath Shop and we were wondering do we have to provice a W-9 to a Company that we sell materials to, No labor of any kind was done for the company. Only materials supplied. They have requested a W-9. I don’t think that we have to furnish them with any W-9 because this does not fall within the requirements for a W-9. Thanks.

7 Chuck April 21, 2011 at 2:16 pm

Thanks Taxgirl and Sarah for the useful information. My concern with responding to unnecessary W-9 requests is that I’ve already received 1099s from people who didn’t understand the purpose of the form. My store sells retail merchandise and does not provide any services that would call for a 1099. I’m concerned that these recurring false 1099s will cause the IRS to think I am not reporting income from services since my tax filings show my income is solely from merchandise sales. Based on what I’m reading I guess I should just send in the form and trust that this company knows the difference. …any other comments or opinions from anyone?

8 Laurie October 23, 2011 at 10:56 am

My husband and I divorced in 2002. I was notified that I owe back owe back taxes. I just got a new job and the gave me a W-9 to fill out. I am scared because if they hold my wages my daughter and I cant survive. Please help.

9 JERRY December 8, 2011 at 10:56 am

Kelly, is correct. If the payment is below $600, a 1099misc. is not required. You don’t do this Kay, just to avoid liability or just business practices. Her concern is giving out her SSN in this day an age, as is required on the form. It’s not much of a security question to give her EIN which she would want to do in place of her SSN if she had one. Its less subject to identity theft. And
an EIN is not directly linked financially to you, as it is under the name of your business, not individually. Saying someone should complete the w-9, just for self protection, and they will report the income anyway, is an attitude of running scared and not addressing the problem.
No, she doesn’t have to to the w-9, end of story, see the 1099misc instructions on page 1, “Specific Instructions”. If they send the 1099 in
showing $300, and stating she refused to complete F W9, the IRS will laugh, because they know the $600 limit rule.

10 Joel December 8, 2011 at 11:54 am

This article and most of the comments after the article are simplifying the purpose of the W-9 too much. It is a requirement by the IRS for any company paying another individual or entity for services to request the completed form until it is obtained. If it is not obtained after documented attempts, the company must report that fact to the IRS. The form’s purpose is more than simply obtaining the TIN for a vendor. It also is a written certification by the vendor as to its legal name, type of entity, and whether the entity or individual is subject to backup withholding. No business should assume that the company name and (sometimes) the TIN printed on a vendor’s invoice is accurate and then use that information believing that the need for a W-9 does not exist, because you would be missing the certification that no backup withholding is necessary for that vendor. Obtaining a completed W-9 from the vendor is absolutely necessary to document what the vendor represented itself to be ( such as being a corporation, not subject to backup withholding, the TIN, the address). The type of entity disclosure on the W-9 helps to determines whether a 1099 is required. The certification regarding backup withholding determines if taxes should or should not be withheld from payments to the vendor (allowing a vendor to avoid paying taxes is probably not advised. These are back taxes the IRS is trying to collect.) The IRS is not allowing companies to “take a vendor’s word for it”. The IRS requires a completed Form W-9 to be obtained in “good faith” from the vendor and be available for viewing by the IRS. It also requires that a new Form W-9 be obtained each year that you do business with that vendor to make sure you know about any changes in the information that would require you to change how/if you report the income paid or if you withhold taxes from payments to the vendor. Regardless of how you feel about the form, the IRS requires it.

11 Jerry January 4, 2012 at 12:40 am

Joel, the ramifications of the W-9 and what it represents are irrelevent in this circumstance. She is only asking, if she has to give it. She appears to know what it is, she doesn’t like the idea of giving it.

Based on my prior post, she does not have to give it. And should quote those sources, and advise the company of such. If they refuse to pay, she can take them to court like everybody else. She can just complete the form and give her EIN just to get the problem out of her hair.

12 Joel January 4, 2012 at 5:11 pm

To answer the taxpayer’s question, yes, I agree; She doesn’t have to provide the W-9. The business requesting the W-9 could pay her without the W-9 or not pay her without the W-9. However, the business requesting the information has the obligation to request the W-9 and report any non-compliance.

My comments were mostly to meant to illustrate that while the issues of payment and privacy are obviously important, the obligations placed on the paying entity by the IRS should not be ignored by that entity or the payee. This isn’t a matter of preference. However, if the issues of privacy and payment are obstructed by this obligation, then one can seek to change the law.

13 Seppe January 13, 2012 at 12:31 am

OK, I’m a sole proprietor LLC. A client (new start up LLC) hired me for services that totaled around $6,000. I completed all services a requested, but they only paid for $3,000. I sued them in small claims and won a judgment for $3,000. They refuse to pay, claiming their business (an LLC) has not made any money and they are not personally liable (which every lawyer, judge and debt collection company reiterated). Now, these pieces of work are demanding I give them my SSN or EIN because they said they are Filing a 1099 on me. I do not want to give my EIN to them because they still owe me money and I’m dumbfounded that they would even ask.
Couple questions:
(1) Other than the $50 fine, do I face any other penalties or repercussions for not providing my EIN?
(2) Majority of my clients to not send me 1099′s. Is that a bad thing? Are there penalties or repercussions that I can face as an independent contractor if my clients don’t send me 1099s?

14 tracy February 17, 2012 at 10:56 am

What if you submit a W-9 to a company and they falsely claim that they paid you? For example, they write checks for cash and say they paid your company in cash and file a 1099 stating the same. If the money wasn’t placed in your checking account, the IRS can accuse you of falsifying income and require that you prove that you didn’t receive it.
There is ample opportunity, in my opinion, for fraud on the part of the W-9 holder…
Can someone elaborate?

15 Ruth January 31, 2013 at 7:33 pm

I can tell you that for fear of identity theft I will NOT submit my SS id to anyone who does not need it, including anyone for whom I do work under $600. I am an entertainer. I work for many people in a year and do not want that many people having my SS number. I pay my taxes every year. To assume that anyone who does not want their Social Security Number sitting in all their clients’ files for anyone to see must be stiffing the IRS is ignorant and closed-minded. I will not do business with anyone who requires a W9 for under $600. As you are suspicious as to whether people are paying their taxes, I am suspicious as to what they will do with my id. Since I have already had a problem with identity theft, my fears are warranted and my policies are based on my own experience.

16 Jake May 3, 2013 at 2:52 am

I’ve seen people arguing back and forth about this W9 issue. The basic issue is, obviously, about payment of taxes and the supposed fear of fines. The ‘fear of fines’ issue has been, in my experience, to be a smoke screen for companies to try to get services and products for free. The lady and the tow service who was being refused payment because she refused to send in a tax form that would never hit an IRS desk to begin with is just the perfect example. I personally wouldn’t send them anything more intimate than a company address to send the check to. Nobody is EVER under any obligation to send a 3rd party company tax information for services under $600. Anyone who says otherwise is a liar and looking to basically play ‘chicken’ with the ignorant. But, as someone said, you can either bug them until then finally give in, or call a lawyer.

17 Shannon Gerdauskas April 28, 2014 at 9:03 pm

I have a similar issue.
I’m a Freelance Graphic Designer, my client asked me to fill out a w-9 form?
I am not making much with him, $600 a month tops. I explained to him that I was currently on unemployment and I would have no issue filling a w-9 out as long as he could offer me so many hours/money a month. He has been paying me all along since February under the table, now all of a sudden he refuses to pay me what he owes me $520 for projects completed until I fill out this form which could affect my unemployment. He even went as far as to say to me that if he were any other employer he would “report me”. I was trying to be honest and upfront with this client. Am I missing something something here? Is what he is doing illegal, unprofessional and unorthodox or is it me that is?

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