Skip to comments.Business's forcing w-9 form compliance, outside of law
Posted on 03/21/2013 12:22:52 PM PDT by George from New England
I am finding businesses demanding I fill out the i.r.s. w-9 form for small jobs where the total payment is under $600. This is subcontractor type work reportable with 1099-misc form at year's end, only if the amount exceeds $600. I am being told that failure to comply could result in an i.r.s. fine of $50. Web research suggests that business have the option to require w-9 compliance
From that site:
"The IRS requires that you obtain a W-9 from every vendor from whom you purchase $600 in labor and services or $5,000 in direct sales, but you can request W-9s from vendors for smaller purchases."
"The vendor must send you a copy of his W-9 upon request, or he will pay a $50 fine to the IRS."
Identity theft is abundant so I don't want my SSN in any database, not required by law. But where do I turn?
You don’t want your customers to know who you are?
It seems to me that they have the option to require this of you. They are not forbidden.
You can either comply or find yourself new clients.
Don’t work for them because they will probably hold your invoice hostage until you provide the W-9. They are running scared over compliance themselves.
Businesses are so confused by the new laws that just about everyone is being asked for a W9.. I know with my business you won’t get paid if we don’t have a W9 on file. No exceptions.
Can I require the service station from which I buy gas or the auto repair shop where I have my van fixed to supply these forms since I am a contractor and these are business expenses? If not, why not?
It looks like you can get an identification number and you won’t have to give out your SS#. I agree with the SS#. But I don’t think anybody can steal your ID with the ID#.
“You dont want your customers to know who you are?”
Customers knowing me and my work IS TOTALLY different than their staff and accountants and payer services having my SSN.
I do not advertise my SSN now do I.
State governments are mostly broke because they have given unemployment insurance so generously, and they are seeking to include any/all independent contractors (who typically don't pay unemployment insurance) as employees under somebody, so they can collect the unemployment insurance taxes on them.
Im a tradesman one of my retail clients asked me for my ss # one year said they wanted to 1099 me i said sure but i need your ss # in return. that stopped that
They are required to get the W-9 or at least enough information to properly file a 1099-Misc should it be required and for most business who wish to remain compliant (the fines are getting crazy) it’s easier to just get a W-9 from everybody.
If you don’t want to give out your SSN then you can apply for a Federal Id Number online at IRS.Gov (there is a link on the main page). It takes about 10 minutes to do and you get the number right then.
insist on payments in bitcoins
What’s the big deal?
If you have a pilots license your license number is your social security number.
if you are on medicare your medicare number is your social security number.
Personaly I don’t care who has my social security number.
If you are doing business and don’t have an employer id number you are in trouble anyway.
Q. What is a federal tax ID number?
A. A federal tax identification number (also know as an employer identification number or EIN), is a number assigned solely to your business by the IRS. Your tax ID number is used to identify your business to several federal agencies responsible for the regulation of business.
Q. Does my business need a federal tax ID number?
A. Any business offering products or services that are taxed in any way must get a federal tax ID number. If your state taxes personal services, or if you are required to collect sales taxes on your sales, you need a federal tax ID number. All the government forms you will be required to file for your business will require either a Social Security number or a tax ID number.
Ten years ago I would have laughed at your good use of extreme example.
Today of course, as a contractor, I say “that’s a REALLY good question”. It is the sum total of $600 for the entire year. Oh - but I’m pretty sure that it is only for un-incorporated businesses. So 8 trips to Home Depot at $1000 doesn’t get counted, but $700 in small engine repair from the guy working out of his garage would.
“It seems to me that they have the option to require this of you. They are not forbidden.”
42 USC 408 makes it a FELONY to use threat, duress, or coercion to try to force a person by fear or deceit to provide his SSN in an unlawful manner.
I have filed Schedule C with my 1040 since 1980 with/under my SSN. Why should I do it any differently now? The i.r.s. has never had a problem.
I’ve been doing business for 20 years without one.
What Is Income?
Since the term income is not defined in the RTC or in the IRC, we are justified by the holding in Holmes v. McColgan supra to search for federal judicial pronouncements on this point. Fortunately for us, the federal courts have been unusually clear on the correct legal definition of income. Appendix J in The Federal Zone contains a short list of those definitions, which are repeated here as follows:
Income is NOT everything that comes in:
We must reject ... the broad contention submitted in behalf of the Government that all receipts — everything that comes in — are incomewithin the proper definition of “gross income” ....
[Southern Pacific Co. v. John Z. Lowe, 247 U.S. 330]
Corporate profits are “income”:
[Income] imports, as used here, something entirely distinct from principal or capital either as a subject of taxation or as a measure of the tax; conveying rather the idea of gain or increase arising from corporate activities.
[Emanuel J. Doyle v. Mitchell Brothers Co., 247 U.S. 179]
Congress CANNOT change the Constitution:
In order, therefore, that the clauses cited above from Article I of the Constitution may have proper force and effect ... it becomes essential to distinguish between what is and what is not “income,” as the term is there used; and to apply the distinction ... according to truth and substance, without regard to form. Congress cannot by any definition it may adopt conclude the matter, since it cannot by legislation alter the Constitution, from which alone it derives its power to legislate, and within whose limitations alone that power can be lawfully exercised.
[Mark Eisner v. Myrtle H. Macomber, 252 U.S. 189]
Again, “income” is a gain, a profit:
Here we have the essential matter — not a gain accruing to capital, not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value proceeding from the property, severed from the capital however invested or employed, and coming in, being “derived,” that is received or drawn by the recipient (the taxpayer) for his separate use, benefit, and disposal — that is income derived from property. Nothing else answers the description.
[Mark Eisner v. Myrtle H. Macomber, 252 U.S. 189]
The Supreme Court has REPEATEDLY ruled that compensation for professional services is not “income”:
In determining the definition of the word “income” thus arrived at, this court has consistently refused to enter into the refinements of lexicographers and economists and has approved, in the definitions quoted, what it believed to be the commonly understood meaning of the term ....
We continue entirely satisfied with that definition, and, since the fund here taxed was the amount realized from the sale of the stock in 1917, less the capital investment as determined by the trustee as of March 1, 1913, it is palpable that it was a “gain or profit” “produced by” or “derived from” that investment, and that it “proceeded,” and was “severed” or rendered severable, from, by the sale for cash, and thereby became that “realized gain” which has been repeatedly declared to be taxable income ....
[Merchant’s Loan & Trust v. Smietanka, 255 U.S. 509]
“Income” has been legally and officially defined:
And the definition of “income” approved by this Court is: “The gain derived from capital, from labor, or from both combined,” provided it beunderstood to include profit gained through a sale or conversion of capital assets. ... It is thus very plain that the statute imposes the income tax on the proceeds of the sale of personal property to the extent only that gains are derived therefrom by the vendor ....
[Goodrich v. Edwards, 255 U.S. 527]
You do NOT obtain “income” by charging for services rendered:
The phraseology of form 1040 is somewhat obscure .... But it matters little what it does mean; the statute and the statute alone determines what is income to be taxed. It taxes only income “derived” from many different sources; one does not “derive income” by rendering services and charging for them.
[Edwards v. Keith, 231 F. 111 (2nd Cir.)]
No gain, no income — no income, no tax:
Income is nothing more nor less than realized gain .... It is not synonymous with receipts .... Whatever may constitute income, therefore, must have the essential feature of gain to the recipient .... If there is no gain, there is no income.
[Conner v. U.S., 303 F.Supp. 1187]
“Income” means “gain” — “gain” means “profit”:
Income” ... means “gain” “derived” from, and not accruing to, capital or labor or from both combined, including profit gained through the sale or conversion of capital, the gain not being taxable until realized, and, in such connection, “gain” means profit or something of exchangeable value, and “derived” means proceeding from property, severed from capital, however invested or employed, and coming in, received or drawn by taxpayer for his separate use, benefit, and disposal.
[Staples v. U.S., E.D. Penna., 21 F.Supp. 737]
Wages and profits are two DIFFERENT things:
There is a clear distinction between “profit” and “wages” or compensation for labor. Compensation for labor cannot be regarded as profit within the meaning of the law.
[Oliver v. Halstead, 196 Va. 992; 86 S.E. 2d 858]
Payment for labor is NOT profit:
Reasonable compensation for labor or services rendered is not profit.
[Laureldale Cemetery Assoc. v. Matthews]
[345 Pa. 239; 47 A. 2d 277, 280]
The meaning of “income” has been CONSISTENT in law:
... “Income” has been taken to mean the same thing as used in the Corporation Excise Tax Act of 1909, in the Sixteenth Amendment and in the various revenue acts subsequently passed ...
[Bowers v. Kerbaugh-Empire Co., 271 U.S. 174]
Again, “income” has had the SAME MEANING in law:
... and before the 1921 Act this Court had indicated ... what it later held, that “income,” as used in the revenue acts taxing income, adopted since the 16th Amendment, has the same meaning that it had in the Act of 1909.
[Burnet v. Harmel, 287 U.S. 103]
“Income” is NOT the same as “gross receipts”:
Constitutionally the only thing that can be taxed by Congress is “income.” And the tax actually imposed by Congress has been on net income as distinct from gross income. The tax is not, never has been and could not constitutionally be upon “gross receipts” ....
[Anderson Oldsmobile, Inc. v. Hofferbert, USDC Maryland]
[102 F.Supp. 902]
Try to find a principle that is better settled:
Remember that our source is not some “tax protest” group. Just about everything we are telling you comes from the U.S. Supreme Court. It would be difficult, and perhaps impossible, in our system of jurisprudence, to find a principle better settled than the one we have been citing.
[Alan Stang, Tax Scam, Mt. Sinai Press, POB 1220]
[Alta Loma 91701, CALIF. 1988]
Other cases not cited here say the SAME THING:
In addition to the cases cited above, the following also support and affirm this definition of “income”: ... United States v. Supplee-Biddle Hardware Co., 265 U.S. 189; United States v. Phellis, 257 U.S. 156; Miles v. Safe Deposit & T. Co., 259 U.S. 247; Irwin v. Gavit, 268 U.S. 161; Edwards v. Cuba R. Co., 268 U.S. 628.
Then post it here
The stupid American sheeple decided there would be few or no checks on Fedzilla last November.
One possible loophole: corporate credit cards and contractors which accept them. We aren't required to get W-9 information for this type of payment.
I can't prove it but I suspect the banksters had this provision written into law so they could skim just a little piece of every business transaction.
Tax his land, tax his wage,
Tax his bed in which he lays.
Tax his tractor, tax his mule,
Teach him taxes is the rule.
Tax his cow, tax his goat,
Tax his pants, tax his coat.
Tax his ties, tax his shirts,
Tax his work, tax his dirt.
Tax his chew, tax his smoke,
Teach him taxes are no joke.
Tax his car, tax his grass,
Tax the roads he must pass.
Tax his food, tax his drink,
Tax him if he tries to think.
Tax his sodas, tax his beers,
If he cries, tax his tears.
Tax his bills, tax his gas,
Tax his notes, tax his cash.
Tax him good and let him know
That after taxes, he has no dough.
If he hollers, tax him more,
Tax him until he’s good and sore.
Tax his coffin, tax his grave,
Tax the sod in which he lays.
Put these words upon his tomb,
“Taxes drove me to my doom!”
And when he’s gone, we won’t relax,
We’ll still be after the inheritance tax.
“””Ive been doing business for 20 years without one.””
So you have never had employees then.
If John Doe accepts your credit card as payment for a bill for $432, his credit card processor will send him a 1099 at the end of the year which includes this $432 as part of the total of all charges processed. The 1099 will be issued under whatever tax id or ss# the business used at the time they signed up for the processing service.
Everybody wants to get their fingers in this pie. Texas has a big issue with determining whether someone is paid as an employee or independent contractor and a pretty lengthy list of rules to define the difference. If they can establish that you don’t meet the criteria as an independent contractor, the person paying you has to pay Texas Workforce fees which go into the unemployment tax fund.
Some cities require you to get a dba and pay a license fee and business taxes, Houston loves their money from this source. Banks require dba documentation as well as a tax id# for a business account. My bank treats business accounts for a sole proprietor as both a business and personal account so I can deposit checks to and from both the business and my name in the same account but I don’t pay any fees because I qualify for no fee banking as a business account.
It does get a little crazy trying to sort through all the city, county and federal regs and the Franks-Dobbs fiasco didn’t make it any easier.
I had employees 3 times and all 3 times it reminded me why I didn’t want employees
It’s getting so complicated to operate a business..it’s ridiculous.
Thanks for addressing the contractor vs employee issue.
We have required our contractors to fill out a W-9 for years or we simply won’t use them. If we don’t have one on file we are required to withold tax and remit to the government “on their behalf”. What company in their right mind wants to be in that position? Companies have probably increased the requirement due to OCare regs (temporarily put on hold) that ANY vendor used will be required to have a 1099 issued to them. Individuals, corps or vendors that sell supplies. Don’t ask me what that has to do with OCare.
Then...our workers comp carrier is requiring that contractors we use carry their own w/c policy or we are penalized.
Geez..I feel sorry for small contractors. I also feel the pain of companies that are trying to exist within the confines of the “rules” of state, federal and companies that they have to answer to.
They are allowed, by law, to ask for the number. That’s the opppsite of “unlawful.” Words means things.
“”Geez..I feel sorry for small contractors. I also feel the pain of companies that are trying to exist within the confines of the rules of state, federal and companies that they have to answer to””
I am one of those, have been for 35 years. I have to follow the rules very closely because I only do work for contractors on government projects. It is at the point now that I feel the only reason I am in business is to be a revenue collector for the government. The government has made it nearly impossible to be a legitimate contractor that follows all the rules. They do some pretty serious stuff to you if you get caught cheating their system.
If you have so many clients, don’t you have a federal taxpayer ID rather than SS# that you could give them?
Why do it now? Please see the question with which you launched this thread.
20 CFR 3 A7 404.1905
31 CFR 103.34(a)(1)
26 CFR 301.6109-1(c)
Dont ask me what that has to do with OCare.”
Nothing the government does has anything to do with anything except redundancy and stupidness. At least it dawned on someone that if they didn’t stop the 1099 nonsense IRS was going to be bombarded with a gazillion pieces of paper.
Again, the unfortunate thing is different government entities including the House and Senate keep passing bills and mandate regulations that duplicate or even conflict with information required from another agency. The underground cash economy is growing by leaps and bounds and more and more people are just moving the cash from one pocket/person to another.
I moved out of the city into a small county that hates paperwork so only deal with the IRS and then only once a year. I consider myself fortunate to have the kind of business that could do this. Otherwise I’d shut the doors.
At least it dawned on someone that if they didnt stop the 1099 nonsense IRS was going to be bombarded with a gazillion pieces of paper.
Does your response mean they are not allowed, by law, to ask?
“The IRS was going to be bomarded with a gazillion pieces of paper.”
That’s the truth. How would they match up a calendar year 1099 with a company’s fiscal year?
Cash economy seems to be coming into it’s own. I have had people work for me, personally, that offer a discount for cash. Of course that won’t work for a company of any size.
I have a couple of rental properties. Since I am an individual, I have never been required to issue 1099’s to people that worked on these properties. Last year, my accountant tells me I am required to.
Guess I’ll just have to do repairs myself. ;)
Dont believe for a minute that has gone away.”
You are right. Requiring the information by that particular method has gone away. The requirement will resurface again but in a different format and from a different direction. And it will be far worse and greater in scope than just having to send 1099’s in for everyone you do business with.
I remember when Hillary tried to institute her healthcare plan. People celebrated thinking it had been done away with forever. But then we had HIPAA which people thought was wonderful because of the way it was packaged and misrepresented and then Romneycare, both just a prelude for Obamacare.
Frog meet pot and here comes amnesty for all.