As a Small Business Owner When Should I Get a W-9?

As a Small Business Owner When Should I Get a W-9?

by Cheri H. Freeh, CPA | Oct 16, 2015
askacpaicon Here’s a scenario: You’re a business owner, it’s January, and it’s time to prepare 1099 forms. Panic sets in because you know there are penalties associated with not filing the forms correctly, and now there are questions on your tax return asking if you filed them that you must answer under penalty of perjury. I’d bet that you would be wishing that you had paid more attention to the requirements during the year. 

So, what are the requirements? Generally, 1099-MISC forms are required to be filed for any unincorporated businesses to whom you paid $600 or more for services in the course of your trade or business or ownership of a rental property. The basic filing requirements are that the completed form must be provided to the recipient by Jan. 31 of the year subsequent to the calendar year of the payments, and the government copy must be filed with the IRS by Feb. 28. The problem usually arises from the fact that businesses and rental property owners fail to obtain a completed W-9 form at the time of the payment. This means that at the end of the year, when they realize that a 1099 must be filed, they do not have the information necessary to complete the form.

A W-9 form is the Request for Taxpayer Identification Number. The form is readily available on the IRS website (irs.gov), and contains instructions for completion. The recipient is required to provide the name and address on the tax return where the income will be reported and the taxpayer identification number associated with that tax return. A completed W-9 form should be obtained from every unincorporated business that is paid for services during the calendar year. If a recipient fails to provide the necessary information they subject themselves to penalties. If the payer fails to complete a 1099 completely (because they did not obtain the W-9 information during the year) they are subject to penalties.

To avoid a panic attack in January, make sure you obtain completed W-9 forms during the year as you work with various vendors. If there’s any question about whether a 1099 will be required, get a W-9 just in case.
Disclaimer
The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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