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

By: Seppe

Seppe — Fri, 13 Jan 2012 05:31:52 +0000

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?

By: Joel

Joel — Wed, 04 Jan 2012 22:11:18 +0000

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.

By: Jerry

Jerry — Wed, 04 Jan 2012 05:40:41 +0000

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.

By: Joel

Joel — Thu, 08 Dec 2011 16:54:58 +0000

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.

By: JERRY

JERRY — Thu, 08 Dec 2011 15:56:37 +0000

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.

By: Laurie

Laurie — Sun, 23 Oct 2011 15:56:04 +0000

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.

By: Chuck

Chuck — Thu, 21 Apr 2011 19:16:12 +0000

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?

By: G. Hodge

G. Hodge — Wed, 12 Jan 2011 14:30:07 +0000

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.

By: Sarah

Sarah — Mon, 13 Dec 2010 15:15:31 +0000

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.

By: Gary

Gary — Wed, 30 Jun 2010 16:36:45 +0000

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.