W-9 Instructions Say...

Some ignorant or deceived clients who owe a Citizen compensation for labor or services performed in any of the 50 States will insist that the service provider fill out a W-9 form with the threat that they will "backup withhold" if the service provider doesn't fill out a W-9. By the time you finish reading this page, you will know that such threats are without authority of law.

One of the laws that pertains to the Form W-9 is listed in the Privacy Act section of the instructions. It is the only law pertaining to the Form W-9 that is listed. The  Privacy Act section states in part: 

Privacy Act Notice
Section 6109 of the Internal Revenue Code requires you to provide your correct TIN to persons (including federal agencies) who are required to file information returns with the IRS to report interest, dividends, or certain other income paid to you; mortgage interest you paid; the acquisition or abandonment of secured property; the cancellation of debt; or contributions you made to an IRA, Archer MSA, or HSA.

Section 6109 was presented and examined on the last page, the W-4 Instructions Say... page. From that examination on the last page, the following points are brought forward and applied to this page's examination.

Since section 6109 is the only law cited as authority for the Form W-9, this should be sufficient at this point to end any further blather regarding a requirement to furnish an identifying number on the W-9. Nevertheless, there is more evidence that also proves the Form W-9 is not required from a Citizen living and working in any of the 50 States united.

The W-9 instructions state:

Purpose of Form
A person who is required to file an information return with the IRS must obtain 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.

The instructions continue:

Use Form W-9 only if you are a U.S. person (including a resident alien), to provide your correct TIN to the person requesting it (the requester)

Observe that a resident alien can be a U.S. person.

The instructions continue:

and, when applicable, to:

2. Certify that you are not subject to backup withholding,

The instructions also state:

What is backup withholding? Persons making certain payments to you must under certain conditions withhold and pay to the IRS a percentage of such payments. This is called “backup withholding.”

"Must under certain conditions..." What are those "certain conditions"? The law will tell you. The law will be examined below.

And the instructions also state:

Part II. Certification
To establish to the withholding agent that you are a U.S. person, or resident alien, sign Form W-9.

Proof beyond what is shown in this "withholding agents26 USC Sec. 7701(a)(16) Withholding agent
The term "withholding agent" means any person required to deduct and withhold any tax under the provisions of section 1441, 1442, 1443, or 1461.

26 CFR Sec. 1.1441-7(a)(1)
For purposes of chapter 3 of the Internal Revenue Code and the regulations under such chapter, the term withholding agent means any person, U.S. or foreign, that has the control, receipt, custody, disposal, or payment of an item of income of a foreign person subject to withholding...

CHAPTER 3 - WITHHOLDING OF TAX ON NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
Sec. 1441. Withholding of tax on nonresident aliens
Sec. 1442. Withholding of tax on foreign corporations
Sec. 1443. Foreign tax-exempt organizations
Sec. 1446. Withholding of tax on foreign partners' share of effectively connected income " mouse over will be shown below.

The IRS publication Instructions for the Requester of Form W-9 states:

Payments Exempt From Backup Withholding
Payments that are not subject to information reporting also are not subject to backup withholding.

As stated just above, backup withholding only applies to payments that are subject to information reporting.

This is the applicable section of law that deals with "backup withholding".

TITLE 26 - INTERNAL REVENUE CODE
Subtitle C - Employment Taxes
CHAPTER 24 - COLLECTION OF INCOME TAX AT SOURCE ON WAGES

-HEAD-
Sec. 3406. Backup withholding

-STATUTE-
(a) Requirement to deduct and withhold
(1) In general
In the case of any reportable payment, if -
(A) the payee fails to furnish his TIN to the payor in the manner required, [... then the payor shall deduct and withhold from such payment a tax...]
Mouse over to see hidden text.(B) the Secretary notifies the payor that the TIN furnished by the payee is incorrect,
(C) there has been a notified payee underreporting described in subsection (c), or
(D) there has been a payee certification failure described in subsection (d),

then the payor shall deduct and withhold from such payment a tax equal to the product of the fourth lowest rate of tax applicable under section 1(c) and such payment.

(2) Subparagraphs (C) and (D) of paragraph (1) apply only to interest and dividend payments
Subparagraphs (C) and (D) of paragraph (1) shall apply only to reportable interest or dividend payments.

(b) Reportable payment, etc.
For purposes of this section—
(1) Reportable payment
The term “reportable payment” means—
(A) any reportable interest or dividend payment, and
(B) any other reportable payment.
Hidden(2) Reportable interest or dividend payment (A) In general
The term “reportable interest or dividend payment” means any payment of a kind, and to a payee, required to be shown on a return required under—
(i) section 6049(a) (relating to payments of interest),
(ii) section 6042(a) (relating to payments of dividends), or
(iii) section 6044 (relating to payments of patronage dividends) but only to the extent such payment is in money.
(B) Special rule for patronage dividends
For purposes of subparagraphs (C) and (D) of subsection (a)(1), the term “reportable interest or dividend payment” shall not include any payment to which section 6044 (relating to patronage dividends) applies unless 50 percent or more of such payment is in money.

(3) Other reportable payment
The term “other reportable payment” means any payment of a kind, and to a payee, required to be shown on a return required under—
(A) section 6041 (relating to certain information at source),
(B) section 6041A(a) (relating to payments of remuneration for services),
Hidden(C) section 6045 (relating to returns of brokers),
(D) section 6050A (relating to reporting requirements of certain fishing boat operators), but only to the extent such payment is in money and represents a share of the proceeds of the catch,
(E) section 6050N (relating to payments of royalties), or
(F) section 6050W (relating to returns relating to payments made in settlement of payment card transactions).
[Remaining text omitted]

The instructions stated: "Payments that are not subject to information reporting also are not subject to backup withholding."  This maze of law exists to tell you what payments, and to whom, are subject to information reporting.

The implementing regulation for this statute says:

26 CFR § 31.3406(a)-1
Backup withholding requirement on reportable payments.
    (a) Overview. Under section 3406, a payor must deduct and withhold 31 percent of a reportable payment if a condition for withholding exists. [...]
    (b) Conditions that invoke the backup withholding requirement—(1) Conditions applicable to all reportable payments. A payor of a reportable payment must deduct and withhold under section 3406 if—
    (i) The payee of the reportable payment does not furnish the payee's taxpayer identification number to the payor, as required in section 3406(a)(1)(A) and § 31.3406(d)-1; or
Hidden(ii) The Internal Revenue Service or a broker notifies the payor that the taxpayer identification number furnished by its payee for a reportable payment is incorrect, as described in section 3406(a)(1)(B) and § 31.3406(d)-5.

Section 3406(a)(1)(A) was examined above. It basically states: 'In the case of any reportable payment, if the payee fails to furnish his TIN to the payor in the manner required, then the payor shall deduct and withhold from such payment a tax...'

§ 31.3406(d)-1
Manner required for furnishing a taxpayer identification number.
    (a) Requirement to backup withhold. Withholding under section 3406(a)(1)(A) applies to a reportable payment (as defined in section 3406(b)) if the payee does not furnish the payee's taxpayer identification number to the payor in the manner required by this section. [...] See the applicable information reporting sections and section 6109 and the regulations thereunder to determine whose taxpayer identification number should be provided.

Point of logic:

Bottom line:

The IRS can only enforce tax collection on income it knows about. If the law does not require information about certain compensation to be reported to the IRS, then it must follow that the IRS is not required to collect tax on that compensation. 

The truth IS as simple as shown on this page.

The truth is only found by reading the law, therefore the W-9 instructions are deceptive by omission.

Now that you have examined the applicable law, you know that a client has no authority to backup withhold if you refuse to provide a taxpayer identifying number on a form W-9.

If such a client does withhold from your payment and sends it to the IRS, the client has just committed a crime. The client has executed the tort of conversion.

My dictionary says:

tort n. Law. Damage, injury, or a wrongful act done willfully, negligently, or in circumstances involving strict liability, but not involving breach of contract, for which a civil suit can be brought.

conversion n. 4. Law. a. The unlawful appropriation of another's property.
Source: American Heritage Electronic Dictionary

As of the writing of this web page, you can verify the W9 instructions on the IRS' own web site at these locations:

http://www.irs.gov/pub/irs-pdf/fw9.pdf
http://www.irs.gov/pub/irs-pdf/iw9.pdf