What are the penalties for non-compliance with Form W-9?

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1

Hi everyone,
I’ve recently started working as an independent contractor and my client asked me to fill out a Form W-9. I understand the basics of the form, but I’m a bit concerned about the potential penalties if I don’t comply correctly.

Can anyone explain what the penalties are for not providing a correct W-9 or for providing false information? Also, what happens if a business fails to collect a W-9 from a contractor?

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2

Hi there,

Great question! Understanding the penalties associated with Form W-9 is crucial to avoid any issues with the IRS. Here are the key penalties for non-compliance:

  1. Failure to Furnish a Correct TIN: If you don’t provide a correct Taxpayer Identification Number (TIN) on the W-9, you could be fined $50 for each instance. This penalty can be waived if you can show that the failure was due to reasonable cause and not willful neglect.

  2. Providing False Information: If you knowingly provide false information that results in no backup withholding, you could face a penalty of $500. This is to discourage providing incorrect details that could lead to underreporting of income.

  3. Criminal Penalties: Willfully falsifying information on Form W-9 can lead to criminal penalties, including fines and imprisonment. This is a serious offense aimed at preventing fraud.

  4. Backup Withholding: If you fail to provide a correct TIN or if the IRS notifies the payer that the TIN is incorrect, the payer must withhold 24% of any reportable payments. This ensures that taxes are collected on income that might otherwise go unreported.

For businesses, failing to collect a W-9 from a contractor can also lead to penalties:

  1. Failure to Obtain Form W-9: Businesses must make at least three attempts to obtain the W-9. If they fail to do so, they may face penalties for not filing correct information returns (e.g., Form 1099). Penalties range from $50 to $530 per form, depending on the size of the business and the timing of the correction.

  2. Intentional Disregard: If a business intentionally disregards the requirement to provide a correct Form W-9 or to file correct information returns, the penalties are significantly higher, up to $630 per form with no maximum limit.

  3. Civil Damages for Fraudulent Filing: If a business willfully files a fraudulent information return, they may be liable for civil damages of $5,000 or more.

I hope this helps clarify the penalties associated with Form W-9. It’s always best to provide accurate information and comply with IRS requirements to avoid these penalties.

Best,
Jes

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