Taxpayer asks:

Do W9 forms need to be renewed each year? Or as long as I have one on file for a given contractor am I covered?

Taxgirl says:

Form W-9 is used to confirm three things: (1) a taxpayer ID number; (2) that the taxpayer is not subject to back-up withholding and (3) that the taxpayer is a US person (even though for this purpose, the definition of US person includes partnerships, corporations, trusts, and estates).

Once a taxpayer ID number has been confirmed, you can pretty much count on the fact that it will never change. Even with respect to companies and partnerships, the number stays the same unless the entity changes form (for example, from sole proprietor to LLC).

Also unlikely to change (without your knowledge, anyway): the taxpayer’s status as a US person. Unless a person actually renounces his or her citizenship, or a resident alien leaves the country permanently, the status for purpose of the W-9 is not likely to change.

The most likely thing that could change is whether the person is subject to backup withholding. Again, this is not a common occurrence but it could happen.

From a practical standpoint, the payee should notify the payor if the information on the form W-9 changes – it’s not the payor’s responsibility to chase the payee for updated information. That doesn’t always happen, though, and the payor is responsible for reporting requirements related to the information on the form W-9.

Not surprisingly, the IRS doesn’t offer much guidance on this issue. From a practical standpoint, it’s not a bad idea to ask vendors to complete a new form W-9 for your records each year – many of our vendors ask us to do this every year. The form takes all of 2 minutes to complete. It’s not burdensome. It’s not expensive. It doesn’t require any expertise. It’s simply a confirmation of the three things outlined above – as well as your address.

So, from a business standpoint, it’s not a bad idea to ask all of your vendors to complete the form, just to keep it in your files. This also increases the likelihood that you won’t forget to add new vendors. From a tax standpoint, it’s generally not required unless the information changes.

Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.

Author

Kelly Erb is a tax attorney, tax writer and podcaster.

Comments

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