Businesses hire independent contractors to fill workforce needs. While hiring employees give companies the right to control the details of work performance, work hours, and the tools to use to complete tasks, hiring independent contractors gives companies the freedom and flexibility to employ professionals only when there is a need. Those with fluctuating workloads, hiring independent contractors proves to be advantageous.
Decades ago, the government disliked the concept of treating workers as independent contractors; thus, guidelines and laws were set for proper qualifications and to protect employees. Today, there are millions of independent workers across the globe.
Independent contractors work as if they operate their own business; they mainly work on their own and for themselves. If you are an employer and paid an independent contractor more than $600 in a financial year for his or her service, the Internal Revenue Service (IRS), the revenue service of the United States federal government, requires you to provide a Form W-9 to each independent contractor you hired.
What is Form W-9?
Form W-9, officially the Request for Taxpayer Identification and Certification, is an IRS form self-employed workers, including freelancers and consultants, need to complete to send their personal information to another person, a bank, financial institution, or an employer. Aside from providing an individual the information they need, employers use the information form to prepare Form 1099-MISC to report to the IRS the amount of compensation paid to non-employee, hired workers.
Filling out Form W-9
Form W-9 is a one-page form with five pages of instructions. Filers need to provide all the required information as accurately as possible.
Box 1 — Name
Provide your full legal name as it appears on your income tax return.
Box 2 — Business Name
If applicable, provide your business name, trade name, doing-business-as name, or disregarded entity name.
Box 3 — Federal Tax Classification
Check the appropriate box to indicate federal tax classification.
Box 4 — Exemptions
If applicable, provide a number or a letter code that explains exemption from backup withholding or Foreign Account Tax Compliance Act (FATCA).
Boxes 5 and 6 — Address
Provide your address.
Box 7 — Account Numbers
Provide any account numbers that the employer may use. This box is optional.
Part I — Taxpayer Identification Number (TIN)
For individual or single-member LLC, provide Social Security Number (SSN). For corporation or partnership, provide Employer Identification Number (EIN). For sole proprietorship, provide both SSN and EIN.
Part II — Certification
Sign and date the form to validate the provided information.
Protect Your Information
When completed, Form W-9 will contain your sensitive, personal information; therefore, If you do not know who is requesting the form, you may decline filling it out to avoid potential fraud or identity theft. The only reason professionals and businesses would ask you to complete the form is when they need to send you an IRS form. If you are suspicious as to why the request was made, you may consult with a tax consultant for legal advice.
There is no official deadline for filing Form W-9; however, you should complete it as soon as you receive it to avoid delays in filing IRS tax forms that first require the submission Form W-9.