Understanding Form W-9 and 1099

Requirements

This policy helps the College with its compliance of IRS regulations concerning the issuance and accuracy of annual tax statements to vendors.

This policy will facilitate IRS reporting requirements▪ Certain types of payments made to vendors must be reported to the IRS. Having

a signed W-9 on file allows the College to report the correct combination of Tax Identification Number (TIN) and name, thus avoiding IRS penalties.

Evidence of validity is documented.▪ Having a signed W-9 on file is considered evidence that the payee is a valid

individual or business. This helps the College avoid making inappropriate payments to fraudulent entities.

This policy primarily responds to the regulations of the IRS, which governs the taxation and reporting responsibilities of U.S. based entities. On an annual basis, the College must issue 1099 tax statements to all eligible vendors regarding the income they received from College.

The College must also electronically transmit a file to the IRS with accurate data pertaining to those vendors including Name, Address, Tax Identification Number and Gross Income.

VendorA vendor for this purpose is: Every entity, business or person that have a vendor

record in the AP Module Database. Vendor Maintenance The electronic means of storing changes in the

vendor information who supply goods and services to the College.

Eligible Vendor Vendor that is required to receive a 1099 Form due to

the type of payment received or/and their Business Entity Form

This policy applies to all faculty and staff that deal with vendors while performing their departmental duties.

WHO SHOULD KNOW THIS POLICY

Senior Financial or Business Officers Chairs of Departments, Directors of Institutes and

Centers Department Administrators Program Directors Faculty Administrative staff with Accounts Payable

responsibility

Vendor Maintenance

The College of William and Mary departments and its units will initiate the request to create or update a vendor record using the new form “Vendor File Maintenance Record”.

These are vendors with whom the department wishes to enter into a transaction and a vendor record ----may or may not exist in Banner.

Federal regulations require that Form 1099-MISC be sent to each person or company, other than corporations, to whom we have paid at least $10 in royalties or at least $600 in rents, services (including

payment for parts and materials), prizes and awards, legal services or medical and health care payments.

All payments processed through the Accounts Payable Office must be reviewed for possible 1099 reporting.

1099 Vendors are flagged during the Vendor Create Process

1099 payments are flagged during the payment process

The best way to ensure you have the information you need is to get a vendor to complete IRS Form W-9 before you write a check.

New Vendor Create Every new vendor must complete a Request for

Taxpayer Identification Verification form (W9) beforeit is created in Banner and before the College will make any payments to the vendor.

The W9 helps us identify the legal entity of a business or individual. ▪ The W9 form verifies the vendor/payee’s legal name, address,

taxpayer identification number, and type or organization (individual, partnership, corporation, etc).

▪ Any false information given by the vendor on a W9 becomes their liability, not the College’s.

If the AP office

receives

paperwork we

will be better

prepared to

process the

payment.

It is important we

know the reason

we receive a new

W9 in the office

The IRS site states: If the tax-exempt organization does not obtain an

SSN or EIN before the organization pays the contractor, the organization must withhold income tax from the payment, generally referred to as backup withholding.

Backup withholding rules require that 28 percent of the payment be withheld, and reported on Form 945, Annual Return of Withheld Federal Income Tax.

http://www.irs.gov/charities/article/0,,id=172606,00.html

New Vendor Name Change (example: doing business as)

Employees and Students receiving payments other than reimbursements

Business Entity Change

A W-9 form will not be required for the following:

Employees of the College including students receiving expense reimbursement or refunds.

Nonresident Aliens or Foreign Entities (a set of different

forms are required)

Petty cash reimbursements

Vendors who are reportable include: individuals

Sole proprietors (including doctors and attorneys),

Partnerships, Limited Liability Companies (except Corporations)

Medical and Healthcare Corporations Trusts and Estates

Scholarship and fellowship payments are not 1099 reportable since all "working" scholarships and fellowships are processed through our payroll office.

Other types of scholarships are not reportable to the IRS.

The best way to ensure you have the information you need is to get a payee to complete IRS Form W-9 before you write a check.

Never assume that because a business name includes the word “Company” or “Co.” that it is a corporation.

Business that are Limited Liability Companies or LLCs, can be treated as sole proprietors, partnerships or corporation in Wisconsin, so don’t assume that LLC in the business name means you don’t have to file a Form 1099-MISC.

If someone refuses to complete Form W-9 or to give the College the information needed to determine if a Form 1099-MISC must be filed, there are two options.

Option 1: A payment can be process, but the payment will have Federal income tax withholdings at the backup withholding rate (currently 28%), and the vendor will receive a net check.

Option 2: You can choose to refuse the business.