Substitutes for Form W-9
According to the Internal Revenue Service, substitutes for Form W-9 must certify three key pieces of information. When a business opts not to use official W-9 forms, the company may develop its own format to submit tax information for entities (payees) paid more than $600 for the tax year.
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Correct TIN
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Substitutes for Form W-9 must verify accuracy of the payee taxpayer identification number or provide proof that the payee has applied for a number. Businesses conducting financial transactions, including banks, real estate and mortgage companies, must have a TIN for each person with whom they do business. Records documenting real estate transactions, debt cancellation and paid income are submitted to the Internal Revenue Service for tax purposes. The IRS lists six taxpayer identification number types. Contact the Internal Revenue Service for more information on TIN numbers. Find contact information in the local phone directory.
No Backup Withholding
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Substitutes for Form W-9 must certify that the payee is not subject to backup withholding. The IRS initiates backup withholding when individuals do not pay taxes on certain transactions, or fail to give a correct taxpayer identification number. Companies are ordered to withhold a certain percentage of funds and pay the IRS instead of the payee. Payments considered for backup withholding include: interest, royalty, commission and other payments listed on Form 1099. Real estate transactions, retirement account distributions and state income tax returns are exempt from backup withholding.
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U.S. Citizenship
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Substitutes for Form W-9 must certify that the payee is a United States citizen or legal resident. Only U.S. citizens use Form W-9. Taxes for foreign entities are assessed differently. Resident aliens, companies, estates and domestic trusts based in the United States are considered U.S. citizens. Partnerships conducting business in the U.S. should issue Form W-9 to U.S. citizens. If forms are not submitted, the employees are considered foreign in the eyes of the IRS and must pay withholding taxes.
Additional Information
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Substitutes for Form W-9 cannot require the payee to agree to additional, unnecessary information or imply that an individual is subject to backup withholding unless she agrees to such information. Place a statement directly above the signature line indicating that the sole purpose of the form is to avoid backup withholding. Use bold type, a box border or highlighter pen to enhance the statement and all certifications. Supply instructions to the payee if he requests them.
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