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Question
BF received a letter from his bank requesting a TIN Certification per the IRS?! What is back-up withholding!?
I'm very concerned and very confused about a notice that he got in the mail from his bank. The relevant parts of the letter say:
"The IRS requires that you certify your taxpayer identification number on a Form W-9. However, our records indicate that we have not yet received a valid Form W-9 for your account.
It is very important that you certify your TIN properly. Per IRS requirements, federal backup withholding has begun on interest paid to your account(s). For interest that has been withheld, you must file a tax return with the IRS to claim a refund. To avoid further backup withholding, please complete your TIN Certification by taking one of the following actions..."
Then it encloses the W-9 form to fill out.
Does this mean that he did something wrong?!
He paid federal income taxes this year (he's a subcontractor - 1099) in full and on time.
Are they attaching his bank account?! WHY?
What should we do!
Somebody please explain this to me in plain English.
This is also the first we have heard of this. We have not received anything from the IRS.
Best Answer
It means that he did one, and only one, thing wrong: He did not give the bank a valid W-9 earlier.
It does not mean that he did anything else wrong or that they are attaching his bank account.
It means only that, because he has not yet given them a valid W-9, they must withhold tax money from the interest that they pay him (not from the money that he deposits) until he gives them a valid W-9.
Backup withholding is like withholding from a paycheck on a W-2 job, except that it comes from interest, not from wages.
Other Answers
Just have your BF fill out the form - give the bank his SS# (TIN number) and let him sign it! When he set up this bank account, he neglected to fill out the forms as required, or tried to assert that this account was a business or exempt. He's not in trouble with the bank, but he'll need to have a CPA (certified public accountant) do his next years taxes to avoid problems.
by dusty_titus - 2 years agoNo need to worry....
When the bank pays interest on his checking, savings, or business accounts, they have to report that interest to the IRS. What the bank is saying is that they don't have the W-9 form that should have been filled out by your boyfriend, stating his TIN number either for himself or his business. When the bank reports the interest paid to the IRS, the TIN number correctly identifies who received the income (interest). Every person or legal entity (business) is supposed to have a TIN number. For a person it's the 9 digit number in the format xxx-xx-xxxx (your social security number), and for an entity it's xx-xxxxxxx.
When the bank doesn't have the W9 on file, they have to withhold some of the interest paid (20%) and forward that to the IRS, just in case the account holder doesn't report the income. If he does report it, what was withheld is applied against the taxes he owes or his refund.
Once your BF submits a W9 to the bank, (shouldn't take more than 3 minutes to fill out), the bank won't have to withhold any more of the interest paid.
As a side note, because of the Obama-care legislation just passed, there is going to be more reporting of business to business transactions (as a subcontractor that means him) required starting in 2011. So make SURE he keeps up with all the W9 requests from all the suppliers he deals with. He doesn't have to fill out a new form every time someone requests one, he can just print copies of a completed form without the date and signature. Then it's just a matter of signing the copy, dating it, and mailing, emailing, or faxing it to the peron requesting it.
Ignore Sandra the spammers posts here!
by Sherlock - 2 years agofirst of all a W-9 is a form letter that requests the id # of the person in question
if your b/f has a bank account he would not have one there without a SS# on his account and unless he has huge savings accounts in that bank they very likely do not withhold income tax on his account
most cases, one has to request withholding
as a 1099 subcontractor and he pays his taxes timely there should not be a problem with withholding
the times I have had an occasion with back up withholding is if the contractor had failed to pay his taxes properly and the one issuing the 1099 had to enact backup withholding
the W-9 is not attaching his bank account, only asking for some ID which they already should have
Your BF did nothing wrong and his account is not being attached.
If your BF does not fill out the W-9 form, the interest on the bank account will have taxes withheld and sent to the IRS. The bank will issue a Form 1099INT and the withholding will be shown. This will be entered on the tax return, both the interest income and the withholding.
This will not complicate the tax return, it is a simple matter to enter the interest income and withholding.
However, if BF does not want taxes taken out if the interest on his bank account, he needs to provide a Tax ID number to the bank, which means his SSN.
