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Backup Withholding and the Form W-9

Use of this form can eliminate the need for backup withholding.

V & V Construction Company v. United States, 2001-1 USTC ¶50,403 (N.D. Ill. 2001)

Background. If a self employed worker performs services for your church (and earns at least $600 for the year), but fails to provide you with his or her social security number, then the church is required by law to withhold 30.5% of the amount of compensation as "backup withholding" (30% after December 31, 2001). Backup withholding is reported on Form 941 (quarterly employer's tax return). Churches that fail to implement backup withholding may be subject to a penalty, as a recent case illustrates.

A construction company hired several subcontractors over the course of the year. When subcontractors were hired for a project, the company would send them a letter requesting them to fill out an enclosed Form W-9. A Form W-9 is used to obtain another person's social security number so that a Form 1099 can be issued ...

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  • October 1, 2001