There are numerous phrases and forms to understand when it comes to business and taxes. The EIN and W9 forms are two of the most frequently misunderstood types. Even though both forms are used for taxes, they have different objectives.
Employer Identification Numbers, or EINs, are special nine-digit numbers given to businesses by the IRS for tax-related reasons. When creating a business bank account, recruiting staff, or submitting tax returns, this number—which is used to identify a corporate entity—is often needed. If a Limited Liability Company (LLC) has workers or is subject to corporate taxation, the LLC must apply for an EIN.
On the other side, a W9 is a form used to ask a person or company for a taxpayer identification number. This form is often used when a firm has to inform the IRS of payments made to a person or another company. The recipient’s name, business name (if applicable), address, and taxpayer identification number—which could be an EIN or a Social Security Number—are all listed on a W9.
Are LLCs Exempt from Filing 1099s? LLCs are not excluded from filing 1099s, no. A 1099 form must be issued to the receiver and filed with the IRS if an LLC pays an individual or another business $600 or more for services done in a calendar year.
You are not treated as an employee and do not receive a wage if you own an LLC. Instead, you get dividends from the company’s profits. You cannot issue a 1099 form to yourself since these distributions are not regarded as wages. How Can I Get a W9 for My Company?
What will occur if a vendor declines to supply a W9?
You can still be obliged to disclose the payment to the IRS even if a vendor declines to issue a W9. In this situation, you can withhold a portion of the payment and send it as backup withholding to the IRS. It is essential to try and get the relevant information from the vendor before making any payments, but this can be a difficult procedure.
The W9 and EIN are both significant tax documents for businesses, but their functions are distinct. A W9 is used to seek taxpayer identity information from a person or company, whereas an EIN is used to identify a corporate entity. LLC owners are not permitted to issue their own 1099s since LLCs are not exempt from 1099 reporting requirements. Simply request a W9 from the supplier or contractor; if they decline, backup withholding may be required.
If a vendor requests a W9 but declines, you should let them know that they are legally compelled to do so if you pay them $600 or more. If they continue to refuse, you might need to backup withhold a portion of their money and report it to the IRS. It is advisable to seek advice from a tax expert or lawyer to make sure you are adhering to all relevant rules and regulations.