What Is a W-9 Form? Who Can File and How to Fill It Out

Form W-9 is a commonly used IRS form for providing necessary information to a person or company that will be making payments to another person or company. One of the most common situations is when someone works as an independent contractor for a business. When you are hired as a contractor for a business or beginning work as a freelancer, you may be asked to complete a W-9 and provide it to the business that will be paying you. Any required taxes based on gains related to the provided W-9 are the responsibility of the TIN holder listed on the document unless the taxpayer is subject to backup withholding. If backup withholding is required, this will need to be noted on the W-9, to properly inform the entity receiving the information of the need to withhold accordingly.

Should you choose not to furnish a Form W-9 or if the information provided is incorrect, a 24% withholding tax will be taken from future payments you receive from your client. In addition, there are penalties and fees for intentionally failing to furnish correct information or misuse of TINs. The W-4 is used by the employer to determine how much federal income tax should be withheld from the employee’s paycheck and reported to the IRS. As opposed to needing this from an external party, a company seeks out a W-4 from its own internal team. A W-9 is also required from people in specific circumstances. A bank or lending institution may ask for a W-9 as part of the process of setting up a new account, as interest and dividend payments are furnished through Form 1099-INT.

This includes changes in marital status, number of dependents, address, and tax identification number (TIN). Depending on your circumstance, select the most appropriate federal tax classification on line 3 for the name entered on line 1. When you begin working with a contractor or freelancer that you will be paying, you should request that the contractor complete a Form W-9 prior to starting any engagement. Failing to do so could prove troublesome after beginning the work.

What information is on Form W-9?

This article is for educational purposes and does not constitute legal or tax advice. For specific advice applicable to your business, please contact a professional. There are 18 different 1099 forms, each one relating to the nature of the income. This includes freelance or contract income, but also real estate sales earnings, debt cancellation, pension contributions and more.

However, simply filling out a W-9 doesn’t require a person to pay taxes. These payments aren’t typically subjected to IRS withholding, meaning it is the payee’s responsibility to track their income and pay the necessary taxes. W9 forms are also used for Form 1098 for home mortgage interest, 1098-E for student loan interest, and 1098-T for tuition. Submit a W9 form to the requester (that may be the payer) required to file an information return like a 1099 form to the IRS.

Understanding the W-9 form purpose is crucial for business owners and independent contractors to ensure proper compliance with tax reporting. In this article, we’ll discuss the W-9 form definition, what it’s used for, best practices, and more. You sign and date the form in this field, declaring the information you have provided is accurate to the best of your knowledge. You will need to cross out Item 2 of the certification if you are subject to backup withholding for failing to to report all interest and dividends on your tax return.

• One of the most common situations is when someone works as an independent contractor for a business.
• Make sure to get the latest version to keep the information current.
• Here’s a look at how Form W-9 works and how to file related forms.
• If your business uses Square Payroll, your 1099 forms are completed and submitted automatically on your behalf.
• If you’re suspicious about a W-9 that someone has sent you, ask them which tax forms they plan on sending you back after you fill it out.
• Some accountants will even suggest collecting a W-9 before issuing any payments at all to encourage people to file up-front.

It provides more accurate information to the Internal Revenue Service. If 1099 filers don’t misuse the TINs reported and use TIN matching to avoid an incorrect TIN, they won’t receive as many backup withholding and penalty notices. The best thing to do is to contact your vendor and request a Form W-9 before you make your first payment. This ensures completion and certification of the form, which you need as a business owner, for tax purposes. While the form doesn’t change that often, it’s good practice to request an updated Form W-9 annually, or as you notice a change in vendor information. This process ensures you will have the most up-to-date information.

What Is Form W-9 Used for?

If someone other than a client, bank, or other financial institution asks you for a W-9 form, you might want to think twice about sending one. This type of information can lead to identity theft and should be protected as such. Navigating all the acronyms, w9 form means forms, and questions of payroll taxes can be downright intimidating. A W9 form is an IRS form used to provide a person’s Tax Identification Number (TIN) to their payer (or whomever is responsible for filing an information return with the IRS).

Any FATCA (Foreign Account Tax Compliance Act) codes on the form are correct. You must sign the certification if you’ve been notified that the previously provided TIN is incorrect,

or there is a problem with the information provided to the IRS at an earlier date. If you’re a contractor and you receive a Form W-9 from an individual or business who is not a client, don’t fill it out.

How do I complete form W-9?

For Taxpayer Identification, select only one appropriate box from a choice of Social Security Number (SSN) or Employer Identification Number (EIN). The IRS W-9 Form 2023 can be accessed from the IRS website. You can also find W-9 instructions here for how to fill out a W-9 form. All features, services, support, prices, offers, terms and conditions are subject to change without notice. TurboTax Premium searches 500 tax deductions to get you every dollar you deserve.

SmartAsset Advisors, LLC (“SmartAsset”), a wholly owned subsidiary of Financial Insight Technology, is registered with the U.S. Securities and Exchange Commission as an investment adviser. SmartAsset does not review the ongoing performance of any RIA/IAR, participate in the management of any user’s account by an RIA/IAR or provide advice regarding specific investments. If you are exempt from reporting required by the Foreign Account Tax Compliance Act (FACTA), you will fill in the second line.

We’ll search 500 tax deductions & credits to provide comprehensive coverage. At the end of the tax year, the information contained on the completed Form W-9 gets used to prepare 1099 forms like 1099-NEC, 1099-MISC, 1099-INT, and 1099-DIV. Making sure that Form W-9 is completed accurately can save a lot of trouble come tax time. Your certification states that you are a U.S. citizen, other U.S. person or resident alien. If you are preparing your W-9 as a joint account, only the person whose TIN shows in Part I should sign.

Employer–employee arrangement

Yes, a W-9 is most often used for individuals who are self-employed. If a worker is an independent contractor, freelancer, or self-employed, Form W-9 must be provided to those whom you have earned over $600 from without having been hired as an official employee. Now, some sole proprietorships also have EINs, but the IRS prefers that sole proprietors use their SSNs on Form W-9.

Since an employer doesn’t withhold income tax for contract and freelance employees, W-9 forms don’t request that information. Businesses use W-9 forms to collect information from contractors or non-employees they are paying. Most importantly, W-9s help businesses collect contractor or non-employee’s tax identification number or social security number. Businesses and banks use the information on W-9 forms to determine if federal tax withholding is required on the person’s payments and to help when they file taxes.

Power your business with Square

Typically, you provide your SSN if you file as an individual or single-member LLC. Use your EIN if you file as a multi-member LLC classified as a corporation or partnership. If you are a sole proprietor, you could use either number, but your SSN is preferable. The title of Form W-9 is officially Request for Taxpayer Identification Number and Certification.

Sending your Social Security number (SSN) and other personal information to a stranger could be dangerous. Scammers will sometimes send W-9s to collect the SSNs of unsuspecting individuals. For example, when a business hires a contractor, the contractor completes form W-9 before starting their work. Form W-9 is the same for all legal entities from individuals to C corporations, S corporations, LLC (limited liability company), partnerships, and trusts. It applies to independent contractors, small businesses, nonprofit organizations, and churches, for example.

Participants in a contest that may win prizes may also be required to fill out a W-9, as the prize value may be taxable income and require IRS reporting. Enter your business name or “disregarded entity” name, if different from the name you entered for step 1. For example, you might be a sole proprietor, but for marketing purposes, you don’t use your personal name as your business name; instead, you are “doing business as” some other name. Exemption codes are for those payments that are exempt from backup withholding. If you find yourself overwhelmed with IRS forms, consider working with a tax professional or looking into tax software to help you manage your business’s tax needs.

• Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice.
• The payer or another entity must file a form 1099 information return to report certain types of transactions to the IRS.
• If you maintain your account in the U.S., you can leave the second line blank or write “N/A.” If you’re unsure about your exemptions, Page 3 of the form outlines situations that would make you exempt.
• The following line, Line 6, leaves a space for you to enter the city, state and ZIP code of this address.
• In contrast, if you are an employee, you’ll complete Form W-4 to let your employer know how much money you wish to have withheld from your paycheck for federal income taxes.
• Refer to the instructions provided with Form W-9 for the appropriate code to use if you believe your business is exempt from potential
  backup withholding.

The amount you need to report depends on the type of income, starting at as low as $10 for interest gains and reaching up to $20,000 for special credit-card transactions. This is where you sign and date the form, indicating that you provided your accurate information. This is a legal document, so it’s important to read and follow all instructions carefully. Most of the time, a company or financial institution will send you a blank W-9 form to complete before you begin business with them. If you need to issue the form, you can download a W-9 from the IRS website. This post is to be used for informational purposes only and does not constitute legal, business, or tax advice.