Daniel HonanFounder, Profitable Painter CPA PLLC · I help painting contractors increase profits & cash flow while reducing taxes♦ Bookkeeping ♦ Tax

Painting Biz Owners: Ensure you're on top of backup withholding to stay compliant in your business

Name: Painting Biz Owners: Ensure you're on top of backup withholding to stay compliant in your business
Uploaded: 2023-09-29T13:15:02+00:00
Duration: 1 s
Channel: Daniel Honan
Description: In this brief dialogue, two speakers discuss the pitfalls painting business owners face regarding backup withholding when paying subcontractors. Speaker…

29 Sept 2023 · 0 min

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In this brief dialogue, two speakers discuss the pitfalls painting business owners face regarding backup withholding when paying subcontractors. Speaker B warns that many owners mistakenly think completing a W‑9 form is optional and may agree to pay contractors without it, believing the contractor is solely responsible for tax obligations. This misunderstanding can lead to serious IRS issues, including backup withholding liabilities and penalties. Speaker A reflects that business owners often assume they have no tax responsibility for contractor payments, highlighting a common compliance gap. The conversation underscores the need for owners to proactively collect W‑9 forms, understand backup withholding rules, and ensure they are not caught in IRS trouble.

So, you know, it's not a lot of fun. What's not a lot of fun?
Yeah. Back up withholding. If you do business with contractors, it is definitely something that you need to be aware of. A lot of folks think it's optional, you know, when they're hiring their new subcontractor, there's sometimes this negotiation that goes on like, hey, I don't want to fill out a W-9, just go ahead and just pay me and I'm not going to fill out a W-9. And some folks get caught in the same row. They don't have their new subcontractor fill out a W-9 and they kind of get in some, in some cases, some big trouble. So from what we've seen working with other folks, even when they were trying to do the right thing, I can get in some messes with the IRS on this topic.
I think what happens is a lot of times, uh, if we're a business owner, we assume that because it is our contractor's responsibility to pay his own taxes, that we can write him a check for his services and not have any liability or responsibility to that payment.