Form W-9 and PRA

[LPC]

There's a thread now on Lost Horizons about how to respond to a request for a W-9 and, like all LH threads, it's chock-full of misinformation, but one interesting point is that Form W-9 does not have an OMB control number. The Crackheads think is a problem, but I don't know that the form is required to have one.

First of all, Forms W-9 are not filed with the IRS. That in itself is not enough to escape the Paperwork Reduction Act (see US Steelworkers v. Dole and the 1995 amendments in response to that decision), but there's actually no law or regulation requiring that anyone complete a Form W-9. The form exists only to provide a way for payors to verify taxpayer identification numbers, and it is the payor that is asking for the form to be completed, and not the IRS.

So it's indirect. The payor is required to report a TIN, and Form W-9 is a kind of "safe harbor" that the payor can rely on in fulfilling its reporting requirements.

Should the IRS be able to promulgate a form without complying with the PRA if it expects other people to use the form? I don't know for sure, but it's not something I'm going to worry about very much.

[jg]

The Form W-9 at http://www.irs.gov/pub/irs-pdf/fw9.pdf includes the following in regard to the person filling the form:

Penalties
Failure to furnish TIN. If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure
unless your failure is due to reasonable cause and not to willful neglect.
Civil penalty for false information with respect to withholding. If you
make a false statement with no reasonable basis that results in no
backup withholding, you are subject to a $500 penalty.
Criminal penalty for falsifying information. Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
Misuse of TINs. If the requester discloses or uses TINs in violation of
federal law, the requester may be subject to civil and criminal penalties.

So, the IRS does claim the ability to assess penalties for not filling out the W-9 (but for which I am too lazy to look at the code sections at the moment)

Backup withholding does apply to those not providing the information to the payer.

Also, the buyer of the services for which the W-9 was requested might decide to use the services of another that was more compliant in providing the information.

As usual, the attempt to evade information reporting will very likely lead to entirely avoidable deleterious consequences to those not willing to comply.

[Gregg]

Interesting, but honestly I thought and still suspect that the crackheads are talking about the I-9 which I have seen them talk about before and is required for all employees. It's not only a much more common form, but one that gets a lot of sovrun types excited.

[Famspear]

.......So, the IRS does claim the ability to assess penalties for not filling out the W-9 (but for which I am too lazy to look at the code sections at the moment).....

Heeyyyyyy.........

When required by regulations prescribed by the Secretary:

[ . . .]

Any person with respect to whom a return, statement, or other document is required under the authority of this title to be made by another person or whose identifying number is required to be shown on a return of another person shall furnish to such other person such identifying number as may be prescribed for securing his proper identification.

-from 26 U.S.C. section 6109(a)(2) (bolding added).

The social security account number issued to an individual for purposes of section 205(c)(2)(A) of the Social Security Act shall, except as shall otherwise be specified under regulations of the Secretary, be used as the identifying number for such individual for purposes of this title.

-26 U.S.C. section 6109(d).

From the Treasury regulations:

Every U.S. person who makes under this title a return, statement, or other document must furnish its own taxpayer identifying number as required by the forms and the accompanying instructions. A U.S. person whose number must be included on a document filed by another person must give the taxpayer identifying number so required to the other person on request. For penalties for failure to supply taxpayer identifying numbers, see sections 6721 through 6724......

-from 26 C.F.R. section 6109-1(b)(1).

Back to the Internal Revenue Code:

In the case of a failure by any person to comply with a specified information reporting requirement on or before the time prescribed therefor, such person shall pay a penalty of $50 for each such failure, but the total amount imposed on such person for all such failures during any calendar year shall not exceed $100,000.

-26 U.S.C. section 6723.

For purposes of this part—

The term “specified information reporting requirement” means—

[ . . . ] any requirement contained in the regulations prescribed under section 6109 that a person—

[ . . . ]

(ii)furnish his TIN to another person....

-from 26 U.S.C. section 6724(d)(3)(B).

Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than 1 year, or both, together with the costs of prosecution......

-from 26 U.S.C. section 7203.

It seems that the regs do not explicitly state that the payee must use the Form W-9 itself. The regs (quoted above) do seem to indicate that you must comply with the IRS "forms" and "instructions," but the current instructions for Form W-9 (revised January 2011) are, I think, a bit ambiguous as far as spelling out the obligation vel non of the PAYEE to use the form itself. Perhaps the payee could comply by simply providing the tax ID number.

[Famspear]

There is this, from the Treasury regs:

In 1991 Individual B opens with Bank X an account which pays reportable interest under section 6049. When B opens the account, Bank X requests that B provide his TIN on a Form W–9. B does not provide his TIN as required by § 301.6109–1(b). As a result B fails to comply timely with a specified information reporting requirement under paragraph (a) of this section for furnishing his TIN to another person. Therefore, a $50 penalty is imposed on B under paragraph (a) of this section for the failure....

--from 26 C.F.R. section 301.6723-1(b), example 2.