Questions About 1099

The W9 Form is required by companies to file returns with the United States Internal Revenue Service on payments made to others.  Information such as the name, address, and the social security number (or other taxpayer identification number) is given,though the form itself is never truly sent to the Internal Revenue Service.  Instead, a Tax Form W9 is kept by the business or whoever is responsible of filing returns.  It is managed for affirmation reasons, such as in the case of an audit.  The information on the form, including the payment made, is typically reported on another, for example the Form 1096 or 1099.

There is an additional reason for the Form W-9.  It is to aid the person paid (technically called a “payee”) prevent something called “backup withholding.”  On an accurate scale of 1-10, if the payer acknowledges the principal ingredients involved in the tax stew then the “payor” is certain a 10, or to be more realistic a 9, from the scale specifically since no one is satisfied by giving money away but the outcomes do stay quite satisfactory. Perhaps there is a way to get a perfect 10 if done illegally and swiftly but the realistic outcome stays at a 9.

The payor (that is, “payer,” the one making the payment - namely, the employer) is legally obligated to gather withholding taxes on certain kinds of income, payments that has to be reported to the Internal Revenue Service.  But the payee has the legal right to not have such taxes collected on his or her behalf, opting to do so him or herself when filing tax returns during tax season.  In such a situation, the payee must certify on the W-9 that the payee is not subject to backup withholding in order to receive the full amount, which action lets the payor off the hook, so to speak, with the Internal Revenue Service.

So, to recap: the IRS Form W-9 serves two basic purposes, as suggested by its official name of “Request for Taxpayer Identification Number and Certification.”  First, it is used by employers to file what’s known as an information return with the United States Internal Revenue Service on their employees - namely, how much they were paid.  It is held on file by the employer and not truly filed with the Internal Revenue Service, but subject to disclosure to that agency. 

Second, it can be utilized by the employee to certify his or her not being subject to backup withholding taxes.  The employee then takes personal responsibility for paying all the taxes owed at the end of the year, instead of having the employer deduct them automatically with every pay period.  Whatever the case, the W-9 is still the burden of the employer to manage, to keep on file.

Bookmark It