An Important W-9 Rule Every Business Must Follow

By: Charles L. Telk Jr., CPA, Senior Tax Adviseremail

We would like to remind our clients of the importance of the new W-9 rules set into effect by recent tax legislation. We cannot stress enough that your attention to this new rule is crucial.

RULE: It is the responsibility of every person, business or entity to have a signed, legible copy of form W-9 on hand for every person, business or entity that it issues a check to. This includes all cooperative members as well. This means that any non-employee you issue money to needs to fill out a W-9 for you to keep on record, regardless of the amount of money you issue them or the number of times in a year that you do so. Yes, that means you could have a lot more W-9 forms to deal with. Unfortunately, there are no exceptions.

Form W-9 is the non-employee equivalent of form W-4. The information contained on a W-9 form for each person, business or entity is used to determine if you will need to file a 1099 form for them.

PENALTY: Even if you think you won’t need to issue a 1099 to a certain person, business or entity, you are still required to have their completed and signed W-9 on file. If you don’t, you run the risk of the IRS disallowing your related tax deductions, and assessing you taxes, penalties and interest.

You should review your contractor, vendor and member files to make certain that you have a signed, legible form W-9 on file for each of them. If any W-9 forms are missing, you need to obtain them. Have your contractors, vendors and members fill them out now.

As we discussed in prior newsletters, there is no valid excuse for a vendor to not provide a signed W-9 form. Should you have any questions regarding this issue or any others, please call us so we can help.