January 31st has come and gone, but if you are still stressed from compiling 1099s, it’s time for a change. Maybe you didn’t collect Form W-9 from everyone and had to spend a lot of time and effort hunting people down after the fact. Form W-9 may seem like a formality since you don’t actually send it to the IRS, but it is essential for your tax reporting and recordkeeping.
The W-9 Form is used by organizations to file returns with the United States Internal Revenue Service on payments made to others. Form W-9 actually serves two purposes. First, it collects taxpayer identification you need to complete information returns in January each year. Second, it helps you avoid backup withholding. The form requests the name, address and taxpayer identification information (usually either the Social Security Number or Employer Identification Number) of a taxpayer you make payment to who is not an employee. The form is not sent to the IRS; it is maintained by you. When the payee signs the W-9, they certify under penalty of perjury that they have completed the form correctly, are not subject to backup withholding and are a U.S. citizen.
Make a commitment this year to require completion of Form W-9 before issuing any payments to all service providers. It is easier to have them complete the form when they are waiting on payment rather than trying to track them down to complete a form after the fact, which often proves difficult and frustrating to do.
