Part of owning and running a business, large or small, is dealing with contractors and vendors that help keep your business running. If you are a vendor or subcontractor, you are required by the IRS to fill out a Form W-9 for every business that you work with to avoid penalties. If you are at the business end of the deal, you are required to ask that a W-9 be filled out to avoid penalties. Sometimes, businesses may have a hard time getting a subcontractor or vendor to fill out the Form W-9 which can lead to panic. Mark Dicus & Company is here to talk about what you should do if you run into this problem.
What Do I Do if a Contractor Vendor Refuses to Provide W9?
Following are the steps you must take as a business owner to make sure you don’t get penalized by the IRS for failure to have subcontractors and vendors fill out a Form W-9:
– The IRS requires that every business document the request of any subcontractor or vendor fill out a Form W-9 three times. This has to be done in writing. The easiest way to get this done is via email.
– The business must begin backup withholding 24% immediately. Report this on a Form 945.
– If the money you have paid to the contractor exceed $600, you will need to file a Form 1099-NEC for that payee. That way, your expenses aren’t confused when they refuse to fill out the Form W-9.
– You more than likely don’t have all the information needed to completely fill out the Form 1099-NEC for this vendor, you will have to complete a paper form. Digital forms aren’t able to leave any spots blank.
– On the form 1099-NEC, write the work “refused” in the Tax identification Number section.
– Once the form is complete, you will send a copy to the IRS and vendor.
What to Do When You Forget to Ask for the Form W-9 to Be Filled Out
The best way to make sure this form gets filled out is to have the vendor or the subcontractor fill it out before you start the business relationship. Of course, things don’t always happen exactly as they should. Once you realize that you forgot to ask for them to fill it out, simply ask them as soon as possible. This needs to be done before December 31st of the year you worked with them. If work started in December, you have until January 31st to have it filled out.
Tax Preparation, Filing, Planning & More in Salt Lake City, St. George, West Valley City, Provo, Orem, West Jordan & Greater Cedar City, Utah
If you have any tax questions about your business and don’t know who to turn to, you can rely on Mark Dicus & Company to give you the information that you need. We can walk you through the tax process and ensure you have the information you need to avoid any penalties. Call us today!