What is the actual requirement for securing a W-9 from vendors, and what is the amount paid that requires a 1099 form? If they are incorporated, do they require a form even if they provide a service?

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Although it is not required by the IRS, it is recommended that you obtain a W-9 form from all vendors, regardless of whether or not you will need to issue a 1099 form to them.

This provides clear documentation of whom you are paying, and if payments are subject to FATCA, it documents that the vendor is a U.S. entity rather than a foreign one; since it is a FATCA requirement to document that, the W-9 is a convenient way to do this.

Some vendors may refuse to submit a W-9, and prefer to just supply a TIN without the form; this should be documented in detail. But for non-FATCA payments, the tax ID number (TIN) is all that you are required to have in order to pay. If the vendor does not supply a TIN, whether on a W-9 or in some other fashion, you must perform backup withholding at 28 percent for U.S. vendors.

If you do not have a W-9 on file from a vendor and receive a B-notice from the IRS, then you must obtain one at that point.

The corporate exemption from 1099 reporting does not apply in the case of payments for either legal or medical services – you must report those, even to a corporation.

The IRS requires that you issue a form 1099-MISC when you have paid a non-incorporated entity $600 or more in the calendar year for services or rents, or royalty payments of more than $10, along with prizes and awards of $600 or more. Please refer to the IRS Instructions for Form 1099-MISC for more detail. And see Form 1099-MISC Filing Basics on the Network.

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