W9 frenzy

[Enola]

Has anyone else noticed a big push on requests for W9's ??
In the past 2 weeks, I've received 4 requests for a W9. The strange part, all have been for under $300 that we charged the customer.

Its always been my understanding that you don't need to provide a W9 under $600. Is this correct?

 

[WildWestDesigns]

Its always been my understanding that you don't need to provide a W9 under $600. Is this correct?

It's going to depend on the jurisdiction, but most of the ones that I am aware of are $600 within the year in total for the same client.

I think what we are seeing here is due to the changes that California has instituted and this is probably all coming about as it's better to just cover one's bases all the way and not take any chances.

 

[Enola]

I have one such customer that is currently 40 days out from my invoice date. His bill is $195.00.
I sent him an email yesterday, and his excuse was that he hadn't received my W9 yet. (LOL thats a new one)
He said he would get my payment out promptly as soon as he gets the W9.

Being this is the first he mentioned a W9, I am not very interested in catering to his foolishness, unless I have to. (and I don't think I'm required)

 

[Solventinkjet]

I'm not an expert but in my experience it has always been under $600 but some people ask for it just to be sure in case it gets over $600 throughout the year. Also, as far as I know it's only for contract work. Did they hire you as a contractor or did your business provide a service? Those are two different situations.

 

[Enola]

Solventinkjet,
I can guarantee it won't get over $600 this year.

The work consisted of installing 4 "unit" number on the transon window above the main door.
He was the contractor that installed the new doors for a small office complex.

Dumb little job, that you wouldn't expect a headache over.

 

[WildWestDesigns]

I'm not an expert but in my experience it has always been under $600 but some people ask for it just to be sure in case it gets over $600 throughout the year.

It's going to be the jurisdiction where the customer is in (in case you do work for say a customer in GA, it goes by GA tax laws). For all the ones that I've dealt with, it's been $600 or more through the year.

I really suspect that since Cali has reclassified what it means to be a contractor or employee, that's got some people going around covering their bases. It's easier to apply the stricter law all the way around versus trying to nitpick on who qualifies and who doesn't.

Technically, nothing is to stop them from asking for it if it's lower, but they are required to ask for it if it reaches that minimum. Now, as to if they are able to hold your payment if you don't supply one, I'm not to sure about that, because they can fill one out on you even if they don't have all that info. They should be able to just make a notation of that on the paperwork.

You also said that it was 40 days over due right now, if my math is correct (and I am an aggie, so it may not be) that would put it this year, which it wouldn't even qualify for the taxes this April, you have all the rest of the year to do that and not be an issue in anyway. Doesn't sound kosher to me.

 

[unclebun]

This has nothing to do with contractor laws. It has to do with Obamacare and the changes they made back then in who is required to get a 1099. If they are asking for W9's now, it's because they have a company policy not to pay any bill without a W9 on hand for the vendor. Then at the end of the year their software can print the 1099's necessary for any vendor over $600 without having to try to get the W9 at the end of the year in a mad scramble. This is actually smart, and every one of you should be doing it too. The only way out of it is to pay by credit card, or when you are paying a company which is incorporated. So if you want cash or check payments from your customers, send them a W9 when they ask.

To make this easy, open the w9 form from irs.gov in Adobe Reader. Use Fill & Sign to fill it in and insert your scanned signature, then Save As to save it as a pdf in your Documents folder with a name like "W9 for (insert your company name here)".pdf . Or print the filled in W9, sign it, then scan and save as a pdf. Then when the request comes for a W9, ask their email address (or hit reply), attach the pdf file and hit send. Painless. I just did one about 15 minutes ago. Took about 15 seconds.

 

[WildWestDesigns]

This has nothing to do with contractor laws.

While there are other use cases, the business-contractor is one of the bigger ones, so I would say that it has something partially to do with that and if a person qualifies as a contractor or an employee.

It has to do with Obamacare and the changes they made back then in who is required to get a 1099.

You have were it is in that bill? I could see maybe in where the employer mandate is for healthcare, but I don't know if it actually changed the qualifications of that.

 

[ams]

I rarely do jobs for clients under $500, but yeah I've been getting a few W9 requests, mostly because I worked for them last year and they want a fresh one.

 

[unclebun]

While there are other use cases, the business-contractor is one of the bigger ones, so I would say that it has something partially to do with that and if a person qualifies as a contractor or an employee.



You have were it is in that bill? I could see maybe in where the employer mandate is for healthcare, but I don't know if it actually changed the qualifications of that.

My apologies. Though it was part of the ACA, that requirement was repealed in 2011 when the Republicans took the House. However the requirements for filing 1099's have been changing every year by rulemaking to the point that this is now the way you have to deal with it:

Over the past few years there have been a number of changes and updates regarding the reporting rules for the mysterious 1099-Misc Forms. I say "mysterious" because many business owners simply guess as to what the rules are and oftentimes get exasperated and just give up choosing to file nothing at all. This can be a dangerous result as the penalties can add up quickly.

Real life story. I literally had a prior client contact me this past year because they chose to file their 1099s on their own and didn't carefully follow the rules. They inadvertently mailed in the forms and didn't electronically file (see rules below regarding electronic filing).

Result. The IRS hit them with a $17,000 and they haven't been able to show reasonable cause to get out of the penalty.

First, keep in mind that the "general rule" is that business owners must issue a Form 1099-MISC to each person to whom you have paid at least $600 in rents, services (including parts and materials), prizes and awards or other income payments. You don't need to issue 1099s for payment made for personal purposes. You are required to issue 1099 MISC reports only for payments you made in the course of your trade or business.

The penalties for not doing so can vary from $30 to $100 per form, depending on how long past the deadline the company issues the form. If a business intentionally disregards the requirement to provide a correct payee statement, it is subject to a minimum penalty of $250 per statement, with no maximum. Bottom line, the penalties can add up!

Related: Time to Send Out 1099s: What to Know

Here are the basics you should know.

• Who are you required to send a Form 1099? You are required to send Form 1099 to vendors or sub-contractors during the normal course of business you paid more than $600, and that includes any individual, partnership, Limited Liability Company (LLC), Limited Partnership (LP) or estate.
• Who are considered vendors or sub-contractors? Essentially, this is a person or company you have paid for services that isn't your employee.
• What are the exceptions? The list is fairly lengthy, but the most common is that you don't need to send a 1099 to:
  • Vendors operating as S or C-Corporations (you'll find their status out when you get a W-9...see below)
  • LLCs or partnerships (ONLY if they are taxed as an S or C-Corp . . . again, see the W-9 below)
  • Sellers of merchandise, freight, storage or similar items.
  • Payments of rent to or through real estate agents (typically property managers). However, keep in mind you need to issue a 1099 to a landlord you are paying rent, unless they meet another exception.
• Don't worry about credit card payments and PayPal. The IRS allows taxpayers to exclude from Form 1099-MISC any payments you made by credit card, debit card, gift card or third-party payment network such as PayPal. (These payments are being reported by the card issuers and third-party payment networks on Form 1099-K.)
• Lawyers get the short end of the stick. Ironically, the government doesn't trust that lawyers will report all of their income, so even if your lawyer is 'incorporated', you are still required to send them a Form 1099 if you paid them more than $600.
• The W-9 is your best friend. Some of you may be frustrated that you don't have the information you NEED to issue the 1099. One of the smartest procedures a business owner can implement is to request a W-9 from any vendor you expect to pay more than $600 before you pay them. Using this as a normal business practice will give you the vendor's mailing information, Tax ID number and also require them to indicate if they are a corporation or not (saving you the headache of sending them a 1099 next year). You can download a W-9 here.

Source: https://www.entrepreneur.com/article/307779

 

[WildWestDesigns]

Here is something that is getting me as well.

Let's supposed that the customer's business has a policy of taking W9s. Just in case it does meet the threshold of how much money is spent. Typically stuff like this, which I would think of as apart of Terms and Conditions should be mentioned before the project got to any meaningful stage (especially before the project had been delivered).

It wasn't (based on how I'm reading things here) and it wasn't mentioned when the product was delivered and to top it off, it wasn't mentioned until the OP contacted them 40 days after. It sounds to me as if it's more of a play of holding off payment as long as they can. It may very well be a policy, but it was the customer's fault for not bringing it up at the beginning that it was a condition on getting payment was to have a completed form. Doing it now, seems very much like a dodge. It may not be, it just seems like it given how I'm reading things here. I am speculating though, so take it for what that's worth.

 

[unclebun]

You can impute nefarious conduct on the customer's part, but what I find is usually the case is that the people who do purchasing don't have anything to do with the paying, and it's not until the bill is submitted that the payables department gets hold of it, and depending on their efficiency or inefficiency, they may not check to see if they have a W9 until they bring the invoice up for payment, which might not be until the standard 15 days after the due date. It is only then that the payables clerk calls or emails asking for the W9.

 

[WildWestDesigns]

You can impute nefarious conduct on the customer's part, but what I find is usually the case is that the people who do purchasing don't have anything to do with the paying, and it's not until the bill is submitted that the payables department gets hold of it, and depending on their efficiency or inefficiency, they may not check to see if they have a W9 until they bring the invoice up for payment, which might not be until the standard 15 days after the due date. It is only then that the payables clerk calls or emails asking for the W9.

That's still a lack of communication within their business and there needs to be a procedure to have that rectified. One cannot unilaterally change the terms of the contract and if it's company policy, those doing the purchases should know policy. If that do or don't may be a different thing altogether, but the question is, they should.

Now, I'm not saying that I personally have a problem with doing W9s, that's not the issue. If it is known that payment demands that it be completed if it hasn't been done already, that galvanizes me to handle things differently.

Now winning prizes, that's different, although some places ask for it when you enter just in case you win something

 

[unclebun]

Should, should, should, but that doesn't mean they do. I'm just relaying my experience. It's been a few years now that everyone we sell to asks for W9's at the beginning of every year. And since I know I have to send 1099's to all my vendors as well (meaning I have to get W9's from them too), I don't let it bother me. I just make it as painless as possible to send them one and do it immediately.

 

[WildWestDesigns]

Should, should, should, but that doesn't mean they do. I'm just relaying my experience. It's been a few years now that everyone we sell to asks for W9's at the beginning of every year. And since I know I have to send 1099's to all my vendors as well (meaning I have to get W9's from them too), I don't let it bother me. I just make it as painless as possible to send them one and do it immediately.

Let's assume no nefarious intent as far as a ploy to keep from paying the bills. Now, I'm reading this as they hadn't paid anything before hand, they may have. 24% of the transaction is the portion of interest and that is what they are required to withhold for those transactions that fall within the min threshold that would truly trigger a W9 (and it doesn't have to be triggered within one transaction, but when it happens during any point in the same year).

I don't see how they can withhold anymore then that 24%.

Now, the one question that gets people, that the OP has to consider is it actually worth it to butt heads, even if technically the OP is in the right? That's were things get screwy.

In my experience, this is the polar opposite, I get these requests now for the transactions the past year. I haven't gotten them during the beginning for the current year, typically those customers that would have that policy to always get this form, needed or not are not ones that I deal with. For different reasons, not necessarily this reason.

 

[visual800]

Solventinkjet,
I can guarantee it won't get over $600 this year.

The work consisted of installing 4 "unit" number on the transon window above the main door.
He was the contractor that installed the new doors for a small office complex.

Dumb little job, that you wouldn't expect a headache over.

You had me at contractor!!!