The Form W-9 Is Not a Personal Attack

Every year, the same thing happens.

A business requests a Form W-9 from a vendor… and the reaction ranges from mild annoyance to full-blown panic.

Let’s clear something up immediately:

A W-9 on its own means nothing.

It does not automatically mean you’re getting a 1099.
It does not “trigger” the IRS.
It is not a conspiracy.

I can’t believe I even have to write this. But inceraisngly, each year, I have to explain that a W9 is not your customer or vendor or the IRS “coming” for you or trying to “track” you.

It is simply a basic information form. It’s existed for years. About 1984 to be exact.

What a W-9 Actually Does

A Form W-9 tells the requesting business:

• Who you are

• What type of entity you are

• And thus how you’re taxed

• Where tax forms should be sent if required

That’s it.

Many corporate offices require a W-9 from every vendor as standard procedure. Others use it simply to maintain accurate contact and tax records. It’s routine compliance — not an accusation or a tracking system.

If You’re a Business Owner, You Should Be Collecting Them Too

Here’s the part many people miss:

If you operate a business, you should be collecting W-9s — not just complaining about receiving them.

You need W-9s to properly issue 1099s when required.
And if you ever need to chase payment, enforce a contract, or place a lien, you’ll be glad you already have the correct legal and tax information on file.

This is basic risk management.

“I’m an LLC. I Don’t Need to Fill One Out.”

Yes. You do.

“LLC” is not a tax classification. It’s a state-level legal structure.

For federal tax purposes, an LLC is taxed as one of the following:

• Sole proprietor

• Partnership

• S-corporation

• C-corporation

That tax classification — not the letters “LLC” — determines how 1099 rules apply.

The W-9 simply clarifies how you are taxed so the payer knows whether a 1099 is required.

In fact, everyone needs to and should fill out the W9 if it’s requested. Even corporations. Because the person sending it doesn’t know you’re incorporated! Once you send them the form, they’ll know and actually take you OFF their list.

What If You Do Receive a 1099?

A 1099 is not “extra tax.” It is reporting.

The income shown on a 1099 should already be included in your books. On your tax return, that income is offset by legitimate business expenses such as:

• Wages paid

• Cost of goods sold

• Contractor expenses

• Operating costs

Many incorporated businesses receive 1099s even when they are technically exempt. It does not change the accounting. It does not automatically increase tax liability. It simply documents income that should already be recorded.

Why This Actually Matters

The IRS does not view W-9s and 1099s as optional paperwork.

There are real penalties for failing to issue required 1099s — and those penalties fall on the business that failed to collect the W-9. You’re not exempt if the person doesn’t respond.

If you refuse to provide one, you are asking your customer to take on unnecessary compliance risk with real monetary penalties.

Most established businesses will not do that.

They will not argue.
They will not chase you.
They will quietly hire another vendor who understands standard business procedures.
We’ve done this. We advise our clients to do this. And we’ve seen clients do this.

Compliance is table stakes for these big companies. If you want corporate contracts or to scale, you need to get over the W9.

Refusing to participate in basic documentation doesn’t make a business look principled. It makes it look risky and immature.

There’s Also a Relationship Cost

Well-run businesses choose vendors who:

• Understand basic compliance

• Don’t create avoidable risk

• Don’t turn routine administration into conflict

Being hostile about standard paperwork is a fast way to lose good clients, not because they’re petty, but because they’re protecting themselves from IRS notices, penalties, and cleanup work they don’t want.

Final Takeaway

If a W-9 feels threatening, that’s usually not a paperwork problem; it’s most likely a systems problem.

Review:

• How you’re classified for tax purposes

• How your income is being reported

• Whether your bookkeeping supports your filings

Compliance work at this stage of business should feel routine and uneventful. If it feels stressful, something deeper likely needs attention.

Clean it up now, before the IRS or your customers force the issue.

At higher levels of business, this isn’t controversial. It’s just how things are done.

And we’re pretty sick of answering these questions and explaining it each year!

— Steinke & Company

Why Proactive Planning is More Important Than You Realize

There's an old saying that reminds us "if you fail to plan, you plan to fail." Whoever coined that phrase was talking about the world of small business accounting whether they realized it or not.

Financial and tax literacy aren't just an important part of running a business. They're literally the foundation upon which everything else is built. Tax literacy helps to make sure that you're not only taking care of your obligations but that you're not paying more money than you should ultimately have to. Financial literacy helps to avoid problems like cash flow issues which could cause even a seemingly successful business to close prematurely.

These are also important concepts to know for individuals, too. It helps avoid problems like not budgeting properly, they can help you understand the true impact of inflation and more. All of this is in the name of avoiding common problems that typically hold people back.

But the thing to understand is that these are not skills that you're born with - you have to be proactive about learning them. You also want to make sure that you have the right partner by your side to help make this process as easy as possible.

The Power of a Well-Laid Plan

One of the major reasons why planning is so crucial in this context is because it helps avoid one of the single biggest problems that both businesses and individuals often face: not budgeting properly.

Indeed, the lack of a sound (and realistic) budget is often one of the major contributors to money problems for most people. When no semblance of a plan is in place, it's far too easy to overspend. It's also likely that you're not paying nearly as much attention to your finances as you should be. This in turn leads to a significant amount of financial stress, which isn't something that you can just get rid of overnight.

What people don't realize is that by coming up with a plan and creating that budget, it can actually put them closer to their goals - not farther away from them. Yes, it may take a bit of additional time to make that big purchase, but you're not going to overspend. You're not going to use funds that were allocated for something more important. You can also see the progress you've made and how far you have left to go, which can help create a much-needed perspective on the entire situation.

Another way in which financial and tax literacy - along with planning - can help both businesses and individuals comes down to avoiding the dreaded trap of "living paycheck to paycheck." It's something that far too many private citizens know all about, and it can even rear its ugly head for business owners, too, albeit in a slightly different context.

For individuals, it's safe to say that they're up against a number of hurdles in addition to a lack of financial literacy. The current job market is nothing if not rough. Economic uncertainty abounds, especially given everything going on right now with the war in Ukraine.

But at the same time, you have to start somewhere - and that "somewhere" involves gaining the knowledge you need to take control of your finances. Not everyone has the opportunity to earn extra income - like by picking up a second job or by moving to a new position that pays more.

Instead, try prioritizing your interests in a way that better aligns with the funds you do have available. Sure, private citizens may want to travel more or purchase a larger home, but your plan may illustrate to you that it just isn't in the cards right now.

The same is true of businesses - you may want to aggressively expand into a new market, but doing so without some type of plan in place is little more than a recipe for disaster.

In the end, financial and tax literacy are two of the most important elements of our society that people just aren't paying enough attention to. But by making an effort to understand your situation and the world around you, you'll find yourself in a much better financial position than the one you were in when you started.

If you'd like to find out more information about why proactive planning is far more important than you may realize, or if you just have any additional questions that you'd like to go over with someone in a bit more detail, contact your tax preparer for this tax year NOW!