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If your partners are pushing for you to put YOUR name on the W-9, I'd be suspicious tbh. Why aren't they willing to put THEIR names on it? Maybe they have tax liens or back taxes they're trying to avoid? Or maybe they're trying to keep income off their tax returns for some reason? Even if you trust them, this arrangement makes YOU the responsible party for all the taxes. You'd have to track down your partners later to get them to pay their share of the taxes, which could get messy if the friendship/partnership goes south.
That's a fair point I hadn't considered. They mentioned they'd "already issued too many W-9s" this year, but I'm not sure what that really means from a tax perspective. Is there some limit to how many W-9s someone can issue in a year? Or are they trying to keep their reported income under some threshold?
There's no limit to how many W-9s someone can issue - that excuse doesn't make any sense. A W-9 is just a form that collects your tax ID information so someone can properly report payments made to you. What they might be concerned about is total reported income. If they're receiving certain benefits (healthcare subsidies, income-based loan repayments, etc.) or if they're close to a higher tax bracket, they might be trying to keep additional income off their returns. Another possibility is they're collecting unemployment or other benefits that would be reduced if they report more income.
Just wanted to add that if this business arrangement continues, you guys should really consider formalizing your partnership with an actual partnership agreement and getting an EIN. I made the mistake of having an informal partnership years ago and it was a NIGHTMARE come tax time. For now, each partner should issue their own W-9 for their portion of the income. It's cleaner that way and ensures everyone is properly reporting their share.
But how would that work if they're being paid by a single client? Would the client have to cut separate checks to each partner? My band runs into this issue with gigs sometimes.
As someone who deals with this regularly, here's what you need to understand: the 1099 is just an information return. For US citizens, that interest gets reported on Schedule B and is taxable income. For non-resident aliens, if you're from a country with a tax treaty that exempts bank deposit interest, you need to: 1) Submit W8BEN to your broker (should be done before they issue 1099s) 2) File Form 1040NR if required 3) Include Form 8833 to claim treaty benefits If your broker already submitted the incorrect 1099 to the IRS, you'll need to file a return to claim the exemption or they'll eventually send you a notice about unreported income.
What's the deadline for filing the W8BEN? I have a similar situation but my broker keeps saying they need extra documentation beyond just the W8BEN form and I'm getting worried about timing.
Technically the W8BEN should be on file before any payments are made to you, but you can submit it anytime. It's valid for three years from the date signed unless your circumstances change. Some brokers do require supporting documentation like a certificate of residence from your home country's tax authority or copies of your passport/visa. This varies by institution and sometimes depends on the amount of money involved. If they're asking for extra documentation, it's best to provide it quickly rather than argue, as they can withhold at the full 30% rate without proper documentation.
I'm confused about something else related to this - I have interest from a savings account (about $350 last year) but never received a 1099. Do I still need to report this? Does the bank report it to the IRS even without sending me a form?
Yes, you absolutely need to report it even if you didn't receive a form! Banks only send 1099-INTs when the interest is $10 or more, but ALL interest income is taxable and must be reported on your return. And yes, the bank almost certainly reported it to the IRS under your SSN even if they didn't send you a form. If you don't report it, you might get a letter from the IRS later asking about the discrepancy. It's not worth the hassle over a small amount - just include it on your Schedule B.
Quick tip from someone who's been audited for sales tax issues - keep REALLY good records of your resale certificate usage. When you buy stuff tax-free using your resale certificate, make sure you can prove that those exact items were either: 1) Resold to customers (with sales records) 2) Incorporated into products you later sold 3) Exported out of state/country The auditor made me provide documentation for a sample of purchases going back 3 years! If you can't prove the items were resold or exported, they'll assess sales tax plus penalties and interest.
Thanks for this advice. What kind of documentation did they specifically want to see during your audit? Just invoices or something more detailed? I'm worried because I'm not sure we've been tracking things that carefully.
One thing nobody's mentioned yet - in most states, misusing a resale certificate is actually a criminal offense! If you use it to buy things tax-free that you don't intend to resell, you could face penalties. I had a friend who bought office furniture using their resale certificate (thinking all business purchases qualified) and got hit with a huge penalty plus interest during an audit.
This might be a weird question, but does anyone know how to actually calculate the right withholding amount? Like is there a formula? My accountant just says "claim 0 if you want a refund, claim more if you don't" but that seems super simplistic.
It's actually pretty complicated. The 2020 W4 form eliminated allowances entirely. Now it's about additional income, tax credits, and extra withholding. The IRS has a Tax Withholding Estimator tool on their website that walks through your full tax situation and calculates the right W4 settings. I'd start there - it's much better than the "claim 0" oversimplification.
Just want to point out that your tax RETURN is the form you file. Your tax REFUND is the money you get back. Sorry to be that person, but the terminology confusion makes tax discussions so much harder!
Khalil Urso
Quick tip - if you're filing past returns, check if you qualify for free file options for those previous years too. I used FreeTaxUSA for some back returns and it was way cheaper than going to a tax preparer. Just make sure you're selecting the correct tax year when you start your return!
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Shelby Bauman
ā¢Do they have the 2023 forms available still? And would they calculate if that forwarded refund from 2022 applies correctly? Thanks for this suggestion!
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Khalil Urso
ā¢Yes, they definitely still have the 2023 forms available! Tax preparation websites typically keep forms for several years back for exactly this kind of situation. As for the forwarded refund from 2022, you'll need to enter that as a payment already made on your 2023 return. Most tax software has a section specifically for "payments and credits from prior years" or something similar. It should then calculate everything correctly, taking that forwarded amount into account when determining if you're owed a refund or still owe additional tax for 2023.
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Myles Regis
Cant stress this enough - DO NOT try to combine tax years! I made this mistake after missing a filing year and it created such a mess. Each tax year is completely separate in the IRS system. File your 2023 return now, and then do your 2024 taxes normally next year.
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Brian Downey
ā¢Totally agree! I did the same thing years ago and ended up with notices from the IRS for the next two years trying to straighten everything out. Just do each year separately and clearly mark the tax year on each return.
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