At some point in your life, you might own your own small business or work for a business that hires contractors, vendors, suppliers or other partners who do 1099 work for you. If they won't provide you with a Form W-9, you might have problems issuing the Form 1099 due to vendors and submitting a copy to the IRS. Reviewing the steps you need to take to get a W-9 from a vendor or a supplier will help ensure that you have met your responsibilities with the IRS.
Make Sure 1099 Is Required
If you are required to file a 1099 for a vendor and you don't, you could be fined and penalized by the IRS. The first step in handling a situation like this is to make sure you are even required to file this form. For example, if you have a supplier who provides you with goods or services on a regular basis, and you will pay them $600 or more during the year, you probably need to submit a 1099 for them.
If you do a one-time transaction with a business for more than $600, you might not need to issue a 1099. Contact a tax professional to determine whether or not you even need to issue a 1099 to this particular person or business.
Read More: Form 1099 Tax Deductions: 10 Top Deductions for Independent Contractors
Contact the Vendor
If you determine that you need to submit a 1099 to the IRS covering a particular vendor, contact the person or business to let them know you need a W-9 for them. You will bolster your case with the IRS if you contact a vendor three times for a W-9, according to the Nakase law firm.
First, contact the vendor when you start doing business with them. Next, contact them on December 31 of the year you started doing business with them. Finally, contact them again on December 31 of the year in which you need to file a 1099 for them.
Make sure you have proof of these contacts. For example, if this is the second time you've contacted them, or they've previously said they don't need to provide you with a W-9, you should take more formal steps. Send your request by registered or certified mail.
Explain the legal basis for your request and potential consequences for both of you if you don't receive a W-9 and issue a 1099 for them. You can tell the vendor you won't be able to do business with him anymore, or that you will need to begin withholding 24 percent of what you owe him. If you feel it's necessary, have your attorney send the letter on your behalf.
Read More: What Is a Schedule C Form: Who Needs to File and How to File
File a Form 945
Normally, you don't take taxes from money paid to a 1099 contractor or vendor. In the case where a vendor refuses to supply you with a W-9, you might need to withhold 24 percent of what you owe the vendor. Talk to a tax professional before doing this.
You will file a Form 945 with the IRS along with an incomplete 1099. You won't be able to file a digital 1099 because it does not allow you to leave blank sections. Using the paper 1099 form, where you are asked to fill in the vendor's Tax Identification Number, you will write, "refused." Send the 1099 and 945 to the IRS and send a copy of the 1099 to the vendor, letting them know how you handled the situation and why you withheld money from them.