Purpose of form. A person who is required to file an information return with the IRS  [such as an employer] must get your correct taxpayer identification number (TIN) to report, for example, income paid to you, real estate transactions, mortgage interest you paid, acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA. [This is not a requirement of the employee, but an obligation of the employer who volunteered to participate in such system.]

What is backup withholding? Persons making certain payments to you must withhold and pay to the IRS 31% of such payments under certain conditions. This is called “backup withholding.” Payments that MAY be subject to backup withholding include interest, dividends, broker and barter exchange transactions, rents, royalties, nonemployee pay, and certain payments from fishing boat operators.  Real estate transactions are not subject to backup withholding.

Penalties
Failure to furnish TIN. If you fail to furnish your correct TIN to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.

Utilization of Internal Revenue Service (I.R.S.) Form W-9, Request for Taxpayer Identification Number and Certification, is defined in Title 26 of the United States Code (USC) and the Code of Federal Regulations (26CFR). According to the code, the I.R.S. form W-9 is used for collecting taxpayer identification associated with securities and brokerage accounts (26 USC 6045), and certain other accounts that pay interest  (26 USC 6049) or dividends (26 USC 6042 & 6044) and amounts greater than 600.00 in a year of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income (properly defined & applied to persons subject to taxation) (26 USC 6041).  Also 26CFR1.6041, 1.6042 and 31.3406-31.3406.

The purpose of form W9 is for the employer to use in his compliance with his chosen participation in the tax system.  It is not for an employee, and there is no requirement for an employee to provide the information.

Then certain words and phrases must be defined to determine their applicability with the form.  Some of those words are income, wages, employee, employer and reasonable cause- to wit:

Wages, Employee and employer.

26CFR

    PART 31_EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE--Table of Contents
        Subpart E_Collection of Income Tax at Source
            Sec. 31.3401(a)-1  Wages.

(a) In general. (1) The term ``wages'' means all remuneration for services performed by an employee for his employer unless specifically excepted under section 3401(a) or excepted under section 3402(e).

26CFR

    PART 31_EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE--Table of Contents
        Subpart E_Collection of Income Tax at Source
            Sec. 31.3401(c)-1  Employee.

(a) The term employee includes every individual performing services if the relationship between him and the person for whom he performs such services is the legal relationship of employer and employee. The term includes officers and employees, whether elected or appointed, of the United States, a State, Territory, Puerto Rico, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing.

26CFR

    PART 31_EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE--Table of Contents
        Subpart E_Collection of Income Tax at Source
            Sec. 31.3401(d)-1  Employer.

(a) The term employer means any person for whom an individual performs or performed any service, of whatever nature, as the employee of such person.

26CFR

    Sec.  1.6041-8  Cross-reference to penalties.

For provisions relating to the penalty provided for failure to file timely a correct information return required under section 6041(a) or (b), see Sec.  301.6721-1 of this chapter (Procedure and Administration Regulations). For provisions relating to the penalty provided for failure to furnish timely a correct payee statement required under section 6041(d), see Sec.  301.6722-1 of this chapter. See Sec.  301.6724-1 of this chapter for the waiver of a penalty if the failure is due to reasonable cause and is not due to willful neglect.

26CFR

    Sec.  1.6042-2  Returns of information as to dividends paid.

(d) Cross-reference to penalty. For provisions relating to the penalty provided for failure to file timely a correct information return required under section 6042(a), see Sec.  301.6721-1 of this chapter (Procedure and Administration Regulations). See Sec.  301.6724-1 of this chapter for the waiver of a penalty if the failure is due to reasonable cause and is not due to willful neglect.

26 CFR

    Sec.  301.6109-1 Requirement to furnish another's number.

(c)“If the person making the return, statement, or other document does not know the taxpayer identifying number of the other person, and such other person is one that is described in paragraph (b)(2)(i), (ii), (iii), or (vi) of this section, such person must request the other person's number. The request should state that the identifying number is required to be furnished under authority of law. When the person making the return, statement, or other document does not know the number of the other person, and has complied with the request provision of this paragraph (c), such person must sign an affidavit on the transmittal document forwarding such returns, statements, or other documents to the Internal Revenue Service, so stating.”

TITLE 26 - INTERNAL REVENUE CODE
    Subtitle F - Procedure and Administration
        CHAPTER 61 - INFORMATION AND RETURNS
            Subchapter A - Returns and Records
                PART III - INFORMATION RETURNS
                    Subpart B - Information Concerning Transactions With Other Persons
                        Sec. 6041. Information at source

All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income (other than payments to which section 6042(a)(1), 6044(a)(1), 6047(e), 6049(a), or 6050N(a) applies, and other than payments with respect to which a statement is required under the authority of section 6042(a)(2), 6044(a)(2), or 6045), or $600 or more in any taxable year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate return to the Secretary, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment.

(a) Requirement of reporting

(1) In general

Every person -

 (A) who makes payments of DIVIDENDS aggregating $10 or more to any other person during any calendar year, or

 (B) who receives payments of DIVIDENDS as a nominee and who makes payments aggregating $10 or more during any calendar year to any other person with respect to the dividends so received, shall make a return according to the forms or regulations prescribed by the Secretary, setting forth the aggregate amount of such payments and the name and address of the person to whom paid.

(b) Dividend defined

(1) General rule

For purposes of this section, the term ''dividend'' means -

(A) any distribution by a corporation which is a dividend (as defined in section 316); and

(B) any payment made by a stockbroker to any person as a substitute for a dividend (as so defined).

TITLE 26 - INTERNAL REVENUE CODE
    Subtitle F - Procedure and Administration
        CHAPTER 61 - INFORMATION AND RETURNS
            Subchapter A - Returns and Records
                PART III - INFORMATION RETURNS
                    Subpart B - Information Concerning Transactions With Other Persons
                        Sec. 6044. Returns regarding payments of patronage dividends

(a) Requirement of reporting

(1) In general

Except as otherwise provided in this section, every cooperative to which part I of subchapter T of chapter 1 applies, which makes payments of amounts described in subsection (b) aggregating $10 or more to any person during any calendar year, shall make a return according to the forms of regulations prescribed by the Secretary, setting forth the aggregate amount of such payments and the name and address of the person to whom paid.

(b) Amounts subject to reporting

(1) General rule

Except as otherwise provided in this section, the amounts subject to reporting under subsection (a) are -

(A) the amount of any patronage dividend (as defined in section 1388(a)) which is paid in money, qualified written notices of allocation (as defined in section 1388(c)), or other property (except nonqualified written notices of allocation as defined in section 1388(d)),

TITLE 26 - INTERNAL REVENUE CODE
    Subtitle F - Procedure and Administration
        CHAPTER 61 - INFORMATION AND RETURNS
            Subchapter A - Returns and Records
                PART III - INFORMATION RETURNS
                    Subpart B - Information Concerning Transactions With Other Persons
                        Sec. 6045. Returns of brokers

(a) General rule Every person doing business as a broker shall, when required by the Secretary, make a return, in accordance with such regulations as the Secretary may prescribe, showing the name and address of each customer, with such details regarding gross proceeds and such other information as the Secretary may by forms or regulations require with respect to such business.

(b) Statements to be furnished to customers Every person required to make a return under subsection (a) shall furnish to each customer whose name is required to be set forth in such return a written statement showing -

(1) the name, address, and phone number of the information contact of the person required to make such return, and

(2) the information required to be shown on such return with respect to such customer. The written statement required under the preceding sentence shall be furnished to the customer on or before January 31 of the year following the calendar year for which the return under subsection

(c) Definitions For purposes of this section -

(1) Broker The term ''broker'' includes -

(A) a dealer,

(B) a barter exchange, and

(C) any other person who (for a consideration) regularly acts as a middleman with respect to property or services. A person shall not be treated as a broker with respect to activities consisting of managing a farm on behalf of another person.

(2) Customer The term ''customer'' means any person for whom the broker has transacted any business.

(3) Barter exchange The term ''barter exchange'' means any organization of members providing property or services who jointly contract to trade or barter such property or services.

(4) Person The term ''person'' includes any governmental unit and any agency or instrumentality thereof.

(d) Statements required in case of certain substitute payments If any broker -

(1) transfers securities of a customer for use in a short sale or similar transaction, and

(2) receives (on behalf of the customer) a payment in lieu of -

(A) a dividend,

(B) tax-exempt interest, or

(C) such other items as the Secretary may prescribe by regulations, during the period such short sale or similar transaction is open, the broker shall furnish such customer a written statement (at such time and in the manner as the Secretary shall prescribe by regulations) identifying such payment as being in lieu of the dividend, tax-exempt interest, or such other item.  The Secretary may prescribe regulations which require the broker to make a return which includes the information contained in such written statement.

TITLE 26 - INTERNAL REVENUE CODE
    Subtitle F - Procedure and Administration
        CHAPTER 61 - INFORMATION AND RETURNS
            Subchapter A - Returns and Records
                PART III - INFORMATION RETURNS
                    Subpart B - Information Concerning Transactions With Other Persons
                        Sec. 6049. Returns regarding payments of interest

(a) Requirement of reporting

Every person -

(1) who makes payments of interest (as defined in subsection

(b)) aggregating $10 or more to any other person during any calendar year, or

(2) who receives payments of interest (as so defined) as a nominee and who makes payments aggregating $10 or more during any calendar year to any other person with respect to the interest so received, shall make a return according to the forms or regulations prescribed by the Secretary, setting forth the aggregate amount of such payments and the name and address of the person to whom paid.

(d) Definitions and special rules

For purposes of this section -

(1) Person

The term ''person'' includes any governmental unit and any agency or instrumentality thereof and any international organization and any agency or instrumentality thereof.

>>>> this is not legal advice.  if you want legal advice, get an attorney or accountant (for all the good it will do you)<<<<

November 2002
revised January 2004
revised June 2004a

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