What is the W-9 Form?
The W-9 Form, or Request for Taxpayer Identification Number and Certification document, is an Internal Revenue Service (IRS) form for self-employed workers, such as freelancers, independent contractors, and consultants. Businesses use it to gain personal and financial information on self-employed workers they will hire.
The W-9 Form asks for identifying information, such as name, mailing address, and taxpayer ID and serves as an agreement that independent contractors to exercise responsibility in withholding taxes from their income. While employers are responsible for withholding a portion of their full-time employees’ income taxes, they are not obligated to do the same for independent contractors.
Businesses utilize the form if they will compensate an independent contractor more than $600.00 a year; nevertheless, the form may still be issued when the amount falls below the said compensation threshold.
Companies use the information gathered to prepare Form 1099-MISC to report to the IRS the amount of compensation paid to the hired workers. Form 1099-MISC is a legal form a business in the United States uses to report amounts paid to a non-corporate U.S.-resident independent contractor for services.
If you are a self-employed worker, don’t send your W-9 Form directly to the IRS; you should submit it to your supervisor or the human resources department of the company you are working for as an independent contractor or freelancer. If you did multiple jobs for multiple companies, fill out a W-9 Form for each company. Often, a company will send you a blank W-9 Form to complete before formally doing business. You may download the form from the official website of the IRS.
Aside from being an independent service provider, there are other situations that require a person to fill out the W-9 Form, including:
- certain real estate transactions;
- payment of mortgage interest;
- payment of student loan interest;
- cancellation of debt; andcancellation of debt; and
- earning of interest from a bank.
Financial institutions, perhaps including your bank, use the W9 Form to gather financial information from customers to report interest and dividends. They may ask for a filled-out W-9 Form when a customer opens an account. W-9 Moreover, foreign financial institutions require customers to complete the W-9 Form to abide by the Foreign Account Tax Compliance Act (FATCA) of 2010 reporting requirements. The FATCA is a tax law in the U.S. that obliges U.S. citizens to report to the IRS any financial account they own outside the U.S.
Who needs to use the W-9 Form?
Professionals who file and manage tax-related information and transactions independently need to use the W-9 Form.
- Independent contractors.As professionals contracted to perform work or provide services to a business as a non-employee, independent contractors are by far the most common users of the W-9 Form. Aside from regularly completing the form, they also manage their own Social Security and health insurance taxes. While they do not have the same benefits that regular employees receive, such as relocation assistance, health plans, and retirement benefit plans to name a few, the best upside to being an independent contractor is perhaps having the freedom to set deadlines and work guidelines.
- Freelancers.Similar to independent contractors, freelancers provide services to a business as a non-employee. The significant difference that independent contractors and freelancers have is the way they handle clients. While the former will most likely work with a particular client until a project is complete, the latter will usually be working with multiple clients concurrently.
- Limited Liability Companies (LLC).Limited Liability Companies need the filled-out W-9 Form from any independent contractors it utilized to complete the IRS Form 1099. While one of the major advantages of an LLC is pass-through taxation, it needs to file IRS Form 1099 to assess the tax its members owe.
How do I fill out the W-9 Form?
The W-9 Form is not intimidating to complete compared to other U.S. legal forms, as it is straightforward and short. Excluding the instructions section, it is not even a page-long form.
In most cases, the business or financial institution is responsible for providing you a blank W-9 Form, though you may download a free copy of the document from the official IRS website. You will need to finish the form by providing all the required information before you undertake any professional and business services.
As simple as it is, you must accurately answer the W-9 Form to avoid any inconvenience.
Use your full legal name. This should match the name on your individual tax return.
Use this line when you have a business name, trade name, doing-business-as name, or a disregarded entity name. Otherwise, you can leave this portion empty.
- Line 3: Federal Tax Classification
Indicate your tax status according to the IRS classification by checking the appropriate box.
Use this section only if you are exempt from backup withholding and/or FATCA reporting. If this is applicable to you, provide a number or a letter code that explains your exemption.
Your employer will use the information you will provide in these lines to mail your information returns. Provide your number, street, and apartment or suite number in line five and your city, state, and ZIP code in line six.
This line is where you can provide any account numbers your employer may find useful. You may leave this optional line if you prefer to.
- Part I: Taxpayer Identification Number (TIN)
If you fill out the form as an individual or single-member LLC, provide your Social Security Number (SSN). For a corporation or partnership, the Employer Identification Number (EIN) is required. In case you are a sole proprietor, you may provide both your SSN and EIN.
Use this section to sign and date the form, confirming that all the data you have provided are true and accurate. Before signing, review your information and ensure that you have followed the instructions correctly.
Tips when filing W-9 Form
The W-9 Form is a basic and simple tax form that you can fill out in minutes. While it is an easy-to-complete, standard legal document, you must exercise diligence and distinguish red flags to avoid legal predicaments.
- Keep your information safe
Tax form fraud is prevalent; thus, when filing your W-9 Form, your primary responsibility is to secure the form to protect your identity, avoiding identity theft and fraud. A completed W-9 Form contains sensitive information, including name, address, and SSN. To ensure that fraudsters will not get ahold of your personal information, you must not carelessly leave your completed form in a public place or send it using unsecured methods. Utilize a reliable means of sending legal documents, such as via hand delivery, mail, or an encrypted email.
- Know the contact person or company
Before filling out the W-9 Form, you must know who is requesting, the reason behind the request, and how your information will be used. Beware of potential phishing scams for any request made via email. Scammers are experts in disguising as professionals requesting individuals to fill out the W-9 Form for business purposes. Be cautious and verify the request before completing and sending back the form to avoid becoming a victim of identity theft or tax fraud.
If you are doubtful whether the request is legitimate or not, it is advisable to speak to a tax consultant for advice. As a rule of thumb, never reply to an email requesting you to fill out the W-9 Form. Also, take note that the IRS does not initiate contact with taxpayers via email. Thus, if you receive an email from the government agency requesting your information using the W-9 Form, it is probably a phishing scam. A legitimate business will either require you to fill out a paper copy or help you access the electronic filing system they are utilizing.
An individual or company can only request you to fill out the W-9 Form if they need to file an information return on you. If there is no legal reason behind the request, you may decline. While you can refuse to complete the form if you are suspicious as to why a business has made the request, a legitimate employer is obliged to withhold taxes from your payment at a rate of 24%.
- Answer accurately
Avoid penalties by answering the W-9 Form as truthfully and accurately as possible. Mistakes on tax forms can be costly; therefore, review your information before submitting the W-9 Form. Do not attempt to falsify any information, as this would result in prosecution, penalties, and imprisonment.
Check your provided information for typographical errors particularly in your legal name or the name of your business and SSN. Make sure that your provided address is correct, otherwise, you will not receive your information returns later.
- Keep the form up to date
ou must provide your client with a new W-9 Form if you relocated to a new address, changed your legal or business name, got married, or made or underwent any significant personal or business-related changes.