vendor or subcontractor refused to fill out a W-9 form?
In the event that a vendor or subcontractor refuses to complete a W-9 form, there are certain steps you can take to handle the situation appropriately:
- Ensure that you have made a written request for the vendor to fill out a W-9 form. It is recommended to send the request via email to document the communication. The IRS requires “three solicitations” for a W-9 form:
- The initial request should be made when you start a business relationship.
- The first annual solicitation should occur by December 31 of the same year (or by January 31 if you began working together in December of the previous year).
- The second annual solicitation should be made by December 31 of the following year.
- Immediately initiate backup withholding of 24% from the vendor’s payments. The withheld amount should be reported on Form 945.
- If you have paid the vendor or subcontractor at least $600 during the year, you still need to file a Form 1099-NEC for them. This ensures accurate expense reporting despite the vendor’s refusal to provide a form.
- Since you lack the necessary information to complete a digital Form 1099-NEC, you will need to fill out a paper form. In the Tax Identification Number (TIN) box, write the word “refused” instead of the vendor’s social security number or employee identification number.
- Once the paper Form 1099-NEC is completed, send copies to both the vendor and the IRS as you would for any other recipient.
What happens if I do not have a W-9 form for someone I paid (because I forgot to ask for one)?
If you realize at tax time that you require a W-9 form from someone but forgot to request it earlier, there’s no need to panic. Simply ask the individual to fill out the form now. Most vendors and subcontractors are willing to provide the information regardless of when you ask. The important thing is to collect the necessary details and correctly complete your Form 1099-NEC for that vendor.
Is there a penalty for not providing a W-9 form?
As a business owner, it is your responsibility to request a W-9 form from all contractors and vendors. It is recommended to collect a complete W-9 form before commencing work and making payments. If your small business fails to file a 1099 for a recipient who should receive one, you may be subject to penalties ranging from $50 to $270 per unfiled 1099. As a vendor, contractor, or payee, filling out a requested W-9 form is crucial to avoid penalties from the IRS.
What should I do with the collected W-9 forms?
Safely store the collected W-9 forms as you are not required to submit them to the IRS. The information provided on the forms should be used to complete Form 1099s accurately. Do not utilize the information for any other purpose or share it with anyone else. Failure to handle the information securely can lead to legal and civil consequences.
How do I issue a Form 1099-NEC without an EIN or SSN?
If a subcontractor you have paid refuses to provide a social security number, you will need to manually complete Form 1099-NEC on paper instead of digitally. In the TIN box, simply write the word “refused.” Subsequently, send copies of the form to both the vendor and the IRS.
What if I want to continue working with a vendor even though they refuse to fill out a Form W-9 or provide a TIN?
If you have requested a Form W-9 from a vendor or subcontractor, but they have declined to provide it, the IRS requires you to initiate backup withholdings of 24% immediately. You should report these withholdings on Form 945. Backup withholdings should continue until the vendor provides a TIN. It is crucial to maintain documentation of your three requests for the Form W-9 from the vendor.