In the past in the US we have had to report companies we have paid a significant amount to to the IRS. This year most all of the vendors, maintenance, local, etc will need to be reported to the IRS for as little as $600. When I posed the question to my accountant, here was her answer.
“The W-9 is a form that a business would keep on file, (it is not sent to the IRS) to verify a vendor’s ID number, legal name and type of business. You would use the information from the W-9 to prepare a 1099 for that vendor or taxpayer at the end of the calendar year if a 1099 were required.
A business should request this information on all entities that include those people or businesses that perform services for them during the year.
Currently if you pay someone more than $600.00 in a calendar year for services, and the business is not a corporation, you would need to provide a 1099. (There are many more rules on this, but that is the basic rule.) Even if you don’t expect to reach the $600.00 threshold, you should request this form up front and withhold payment to the vendor until you receive the form. It is usually easier to get it before rather than after the fact; vendor may have moved or changed phone numbers, etc. Otherwise, you may need to take “backup withholding” from the payment to the vendor, as you may be liable for income taxes on the income you paid that vendor if they do not properly report the income to the IRS.”
There have been some other changes and my accountant is having me collect the W9 for everyone since there is a bit of a grey area with the corporation status this year.
I realize there are individuals who read my blog outside of the US. It would be interesting to know if you have to do anything similar and to educate our readers.
