4 Reasons to Get IRS Form W-9


1) Two Simple Questions That Taxpayers Will Need to Answer Carefully This Year

Two simple questions were added to the income tax returns last year.  These were:

“Did you make any payments in 2011 that would require you to file Form(s) 1099?”

“If “Yes,” did you or will you file all required Forms 1099?”
These two questions appear on all business returns including Form 1120, U.S. Corporate Income Tax Return, Form 1065, U.S Return of Partnership Income and form 1040; Schedule C, Profit or Loss From Business (Sole Proprietorship) and Schedule E, (Rental).

Taxpayers need to understand the filing requirements of Form 1099 to answer these questions correctly.

2) Issue Form 1099

Taxpayers will need Form W-9, Request for Taxpayer Identification Number and Certification, as the basis to complete Form 1099.  The W-9 will list the taxpayers:



Tax Identification number

The Type of Entity

That they are Not Subject to Backup Withholding

The recipient will need to certify the information listed above is correct.
A 1099 will need to be issued to all unincorporated businesses that are paid more than $600.  An unincorporated business includes sole proprietorships, partnerships and limited liability companies (“LLC”).  Form 1099 generally does not need to be issued to any corporations.  A 1099 however needs to be issued to all attorneys, regardless of their organizational structure.

3) Penalties for Failure to File Form 1099

There are penalties for failure to file Form 1099. The penalties vary, starting at $15 and going up to $50 per 1099 that is filed late or is not filed. In the past you might have been able to use ‘reasonable cause’ as your reason to have the penalty abated.  With these two simple questions that have been added to the tax returns, this would appear to be much more difficult to obtain.

4) The Tax Gap

Congress is very concerned about the ‘Tax Gap.’  Essentially this is the amount of taxes that are projected to come in versus the amount of taxes that are coming in. In 2006, the last report on this gap, the deficiency was estimated at $385 Billion. According to the IRS, underreporting remained the biggest contributing factor to the tax gap.

ACTION ITEM: Taxpayers that need to issue IRS Form 1099 need to obtain Form W-9 in advance.
If you need assistance with your 1099’s please contact us.

Tom Scanlon has over thirty years experience in public accounting with an extensive background in the areas of financial, tax, and estate planning. He prides himself on providing in-depth and customized solutions to privately held businesses and their owners. He is a Certified Public Accountant and Certified Financial Planner®. Tom is a frequent speaker for area organizations and has  recently been quoted on CNBC, Fox 61 News and AARP's blog. Tom also has been a guest columnist for numerous publications including The Wall Street Journal, Barron's, Money Magazine, The Hartford Courant, The Hartford Business Journal, and The New Haven Register. He is a member of the American Institute of Certified Public Accountants, the Connecticut Society of Certified Public Accountants, and the Financial Planning Association. Active in the community, Tom supports a variety of not-for-profit organizations.

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