Page 161 - Essentials of Payroll: Management and Accounting

ESSENTIALS of Payr oll: Management and Accounting
compensation,” which is a catchall for the majority of payments made,
unless they are specified in one of the other boxes. Box 4 is also needed
if the company cannot obtain a taxpayer identification number (see next
paragraph) from a supplier, in which case it must withhold 30 percent on

payments made and report the withheld amount here.
The key factor for the average business is to determine if its sup-
pliers are corporations. This is most easily done by issuing a W-9 form,
“Request for Taxpayer Identification Number and Certification,” on
which the supplier states its form of legal organization and identifica-
tion number, which the company can then use to issue a Form 1099, if
necessary. A sample W-9 form is shown in Exhibit 5.5.

The W-9 is a simple form. The supplier fills out the identification
information in the top block, enters an identification number in Part I,
and signs the document in Part II. Suppliers may change their form of
legal organization from time to time, so a company seeking to be in
complete compliance with the law may want to consider making an
annual W-9 mailing to all of its suppliers, so it has documentary proof
of why it is (or is not) issuing 1099 forms.

T IPS &T ECHNIQUES

Rather than go to the expense of making an annual mailing of W-9
forms to suppliers, you can simply e-mail them a PDF file that contains
the form’s image. Suppliers can then print the form directly from the
e-mail program and either mail or fax back the completed form. To
take advantage of this tip, however, you must compile a database
of e-mail addresses for the accounting contacts at all suppliers. If
this information is not available for some suppliers, then a supple-
mental mailing is typically required to account for them.

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