W9 Form - Are You Protected?

Did you know as a small business owner the IRS expects you to have a signed W9 on file from each vendor you do business with?  The W9 is a rather simple form that asks the vendor to provide the following to you:

• Name of Business
• Business Form - Sole Proprietor, LLC, Partnership, Corporation
• Exempt Status
• Address
• EIN/SSN as applicable
• Signature of company official

Each year end you will use the information provided on the W9 to determine whether you need to send a 1099 to the vendor along with a copy to the IRS. A 1099 for a vendor is like a W2 for an employee, it reports taxable income to the government.  Failure to issue 1099s can result in hefty fines and penalties from the IRS.

So, you may be asking yourself, "Why do I need this to be protected?"  The answer - by signing the W9 form your vendor is attesting to his or her tax status, and whether their payments from you need to be reported to the taxing authorities.  In essence, the W9 is your "proof" that you followed the appropriate process for tax reporting.  If the IRS audits you, they will look at your W9 forms to ensure you sent out correct 1099s. 

Occasionally, you will run into the vendor who puts up a fight and doesn't want to give you this information.  You can remind this individual of the penalties he or she can encounter for refusing to provide this information, but it's my personal opinion that you should probably just look for a different vendor.

Click on the below link to obtain a copy of the IRS W9 form.
http://www.irs.gov/pub/irs-pdf/fw9.pdf?portlet=3