Who Needs to File IRS Form W-9?

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The Form W-9 helps the IRS collect outstanding debts.
The Form W-9 helps the IRS collect outstanding debts. (Image: teenager with mobile phone image by Petr Gnuskin from Fotolia.com)

Form W-9 is used by certain taxpayers, such as corporations, partnerships and sole proprietors, to obtain necessary data required to produce Form 1099s that will be filed with the IRS. The purpose of the form is to verify the taxpayer identification number or employer identification number for U.S. service providers that are not regular employees such as consultants or independent contractors. The Form W-9 assists a company in determining whether the individual is subject to backup withholding.

What is Backup Withholding?

Backup withholding is the amount that will be withheld from wages or other payments. Backup withholding occurs when a taxpayer or employer identification number and name are different than IRS records or the taxpayer has outstanding IRS debts. Backup withholding will be required until the outstanding taxes have been paid in full.

The current rate of withholding for backup withholding is 28 percent. This number is adjusted from time-to-time to reflect cost of living adjustments and will increase to 31 percent as of January 1, 2011.

Filing a Form W-9

This form is never filed with the IRS. It simply serves as verification for the company requesting the information whether the company must withhold the mandatory backup withholding from any payments made to the service provider. The IRS will send notice to the company if an individual’s name and taxpayer identification number do not match.

What Information is Reported on Form W-9?

Form W-9s basically serve one purpose: to verify taxpayer identification numbers. The Form W-9 is a relatively simple form that requests name, address, taxpayer identification number or employer identification number. The Form contains certifications that the taxpayer must make under penalties of perjury. These certifications state that the taxpayer has provided the correct taxpayer identification number, the taxpayer is not subject to backup withholding and the taxpayer is a U.S. citizen or other acceptable person as specified in the Instructions to Form W-9.

Penalties

Taxpayers who fail to provide correct identification numbers to a company that requests it may be subject to a penalty of $50 for each failure made as a reasonable mistake. In the event a taxpayer provides false statements with no reasonable basis, a $500 penalty may be assessed. Taxpayers who willfully make false statements may be subject to criminal fines and possibly imprisonment.

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