1099 Tax Reporting and 28% Withholding

Payments for services to U.S. independent contractors, other individuals, or unincorporated businesses of $600 or more in a calendar year are reportable to the IRS on Form 1099. Any payments for legal and medical services to U.S. corporations are also reportable on IRS Form 1099. William & Mary is required to withhold 28% tax from reportable vendor payments if a Taxpayer Identification Number (TIN) Social Security Number (SSN) or Employer Identification Number (EIN) is not provided in advance of payment.

The university (i.e., Accounts Payable, and/or originating department) is responsible for obtaining correct vendor name, address, social security number/employer identification number and type of organization for tax reportable payments to new vendors prior to making the first payment. This information should be captured upon completion of the Form W-9. If the supplier does not complete Form W-9, the IRS requires that W&M withhold 28% tax on payments to the vendor. The university is then required to remit this Backup Withholding tax to the IRS on Form 945. If W&M fails to obtain the Taxpayer Identification Number and does not withhold the 28% tax for a reportable payment, the university is liable for the amount that should have been withheld plus penalties and interest.

Accounts Payable is responsible for mailing Forms 1099 to the vendor and submitting the electronic file of the 1099s to the IRS.