PMC WITHHOLDING A VENDORS CHECK

Hi everyone! I'll try to make this short and to the point.
We are in Ontario, California and we hired a vendor. The PMC is withholding the vendor's check until he fills out a W-9. We have already authorized the vendor to do the work and he has completed it, but the PMC won't release his check until he fills out the W-9. Is the legal and can the PMC control us and our money this way?
Thank you in advance for your help!

Our Treasurer does the same thing. The contractor needs to submit all necessary forms. They know this.

Your MC is protecting the HOA from lawsuits or tax complications. Good for them!

Kathleen,

I would say your property manager knows her business! FYI, this is what a W-9 is for:

Form W-9: Request for Taxpayer Identification Number and Certification, is used to certify under penalties of perjury that your social security number is correct and that you are not subject to backup withholding. If you fail to make this certification on a Form W-9, or similar statement, backup withholding may begin immediately on your new account, and 28% of the interest or payments paid on your account will be withheld for income tax.

I agree with both Kirk and Mary on this.

We had a pretty bad experience with a vendor who did not provide a W-9.

We don't have a management company, but had we had one, and they were as on top of this as yours appears to be, then we would have avoided some mess.

The vendor worked for us for 4 years. Our treasurer and our VP at the time both were good friends with him.

They helped to make sure he never turned in a W-9.

We didn't discover the issue until both people were voted out (actually they both quit at different times when a new, more detail-oriented board) was voted in.

It was only then that we discovered the problem when we went to the vendor to have him sign a W-9 because we could not find any on file.

He had been working for us tax free for 4 years.

Brian,

This thread is over 3 years old. Typically it's best to start a new thread vs. reactivating an old thread. This is because laws change and what may have been good advice then might not be good advice now (which can become confusing for readers of the thread).

In my opinion, the risks you incur while waiting for a W-9 are:
1) mechanics lien being filed
2) Word of mouth information to other contractors

Upfront I obtained from the county, copies of signed disclaimers that the licensed owners of the business have no employees who would lawfully need to be covered by worker's comp insurance.

If I continue to withhold the check I want to know that I'm doing so from a position of having an advantage.

Colorado state law requires that the party who files a mechanic's lien institute a lawsuit within six months of the completion of the project. If the claimant misses that deadline, the mechanic's lien is unenforceable.

If my motivation for withholding the vendor's check is to comply with tax law and protect the HOA from tax complications, why would a potential vendor's lawsuit have any merit?

Word-of-mouth can go the other way; property owners and managers here are learning about this ridiculous standoff and may decide to never deal with the vendor for work on their other properties.

The purpose of a Form W-9 is to obtain taxpayer ID information (SSN or EIN) from the vendor because the payer believes it will be necessary to file a 1099-MISC for the vendor at the end of the year. The vendor may be refusing to supply this information because, 1) for security reasons he does not want to give out his SSN or EIN, or, 2) he believes he can avoid having his income reported to the IRS by refusing to supply the requested information (which won't work).

The IRS requires the vendor to supply the requested information to the payer, or the IRS may subject the vendor to a penalty once it has been determined that the vendor willfully refused to supply the requested taxpayer information.

If the vendor refuses to supply a TIN, the payer MUST IMMEDIATELY begin backup withholding on any payments made to the vendor (currently, a flat rate of 28%). Backup withholding is reported to the IRS on line 2 of Form 945 at the end of the year and the amount(s) withheld sent to the IRS at that time (although if the annual amount of taxes withheld are high enough, payments may have to be made periodically during the year).

Information regarding backup withholding requirements can be found in IRS publication 1281, which also contains examples of the required tax notices that must be sent by the payer to the vendor.