Our recommendation? Before you make a payment to anyone outside the company.
Form W-9 is a request for Taxpayer Identification Number (TIN) and Certification and will:
- Help you to determine who should receive a Form 1099.
- Provide you with the necessary information to complete Form 1099, when required, such as name, address and Social Security or tax identification number.
- Relieve you from liability if the payee does not complete the form properly.
- Help you to avoid penalties for filing late or failing to file 1099s.
In general, your business must issue a 1099 to any person outside the company that you have paid $600 or more to during a tax year. This includes payments for rents, services (including parts and materials), prizes and awards, or other income payments. Payments to corporations are exempt from this reporting requirement, except in the case of payments made for legal services. The exemption from reporting payments made to corporations does not apply to payments made to attorneys. The 1099 requirements for payments for legal services apply regardless of how the payee’s entity is organized or what their filing status is with the IRS.
Do form W-9s need to be renewed each tax year? The short answer is that there is no requirement to do so. The payee should report to you any changes in their information. Because that may not happen, you can request that vendors complete a new form W-9 at any time.
Donovan & Limroth advises clients not to wait till year end to obtain the W-9 from payees. This is now even more important because the IRS has moved the 1099 filing deadline up from February 28 to January 31.
The easiest strategy is to require a vendor to complete a W-9 before issuing payment. It is reasonable and customary to make this request, so don’t hesitate to make this a requirement before making payment.
To ensure that your records are properly maintained, contact Donovan & Limroth if you have questions regarding W-9 and 1099 forms. A current version of form W-9 can be found on the IRS website.