A W-9 form is an Internal Revenue Service tax form that shows that the taxpayer is not subject to backup withholding, and is charged with paying his or her own taxes. The W-9 form is a necessary guide in completing a contractor’s tax obligations for the calendar year, either with the help of a tax accountant or by the contractor.
Generally, businesses that use independent contractors don’t withhold any income taxes, Social Security taxes, or Medicare taxes, as do regular employers – it is up to the individual contractor to meet those IRS tax obligations. The law will, however, mandate companies who use contractors to submit a 1099-MISC tax form to match independent contractors’ tax filings with their annual tax income.
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Who is the W-9 Form Meant for?
W-9 forms are meant for independent contractors, and not for full-time employees. Unlike full-time and part-time employees, independent contractors don’t have taxes deducted for business services provided to clients – usually corporations, small-to-midsize companies, non-profits and other business-oriented organizations. All the data presented on a W-9 form comes from IRS tax form 1099, which lists any income paid out to an individual that otherwise would be recorded on an IRS W-2 tax form.
This W-9 form is meant for self-employed workers like freelancers, independent contractors and consultants. If you have earned over $600 in a tax year without being hired as an employee, you are mandated by law to fill this form.
If your employer sends you a W-9 instead of a W-4, the company has likely classified you as an independent contractor. You should confirm with the company that this is the case. Knowing your status can help you plan your tax return.
The W-9 form is for businesses to keep track of their external workforce. It simply means you don’t send your W-9 form to the IRS. Rather, you send it to your supervisor or the company’s human resources department. If you performed multiple jobs for multiple companies, you could fill out multiple W-9 forms in the same year.
You will also have to submit new W-9 forms any time you change your name, business name, address or tax ID number. 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.
Note that you can refuse a request to fill out a W-9 but only if you are suspicious as to why a business has made the request. Always be careful of filling out the W-9 if the business does not have a legitimate reason to ask you to fill it out. For instance, if you are a full – time employee, you’re not required to fill out a W-9. It is only required of independent contractors, freelancers and possibly part-time employees.
Also be hesitant if your bank requests you to fill in a W-9. They ought to have that information on record and may be asking for it merely to report on dividends and interest paid to its customers. However, if you refuse to fill in the W-9, your client is mandated to withhold taxes from your payment at a rate of 24 percent.
The W-9 is completed on paper or electronically. If the business requesting the W-9 is doing it through an electronic filing system, you need to make sure that a hard copy can also be produced if the IRS calls for it. An electronic signature is required for the electronic form.
Steps to Fill Out a W9 Form for a Business or LLC
Form W-9 is one of the easiest IRS forms to complete, but if tax forms seem daunting to you, follow the guide below. The business that hires you should fill in its name and employer identification number. You will then fill out the form line by line.
Line 1 – Name
This will be your full name and it is expected to match the name on your individual tax return.
Line 2 – Business name
If you have a business name, trade name, DBA name or disregarded entity name, fill it in here. If you do not have a business, you can leave this line blank.
Line 3 – Federal tax classification
This section defines how you, the independent contractor, is classified when it comes to federal taxes. If your limited liability company (LLC) is its own separate tax entity, such as a partnership, a C corporation, or an S corporation, report the name of the LLC and its federal employer identification number.
Check the appropriate tax classification box at line 3, indicating whether you’re a partnership, C corporation, or S corporation. Do not check the limited liability company box. This sounds counterintuitive, but it is what the IRS wants.
If the LLC is owned by another LLC, you would then check the limited liability company box. You must also indicate the tax classification of the parent LLC. If the LLC is owned by a single member, indicate the tax classification of the owner.
If the LLC is owned by a single member who is a person the IRS says that you must indicate the name of the owner on the “name” line and the name of the LLC on the “business name line.” The IRS prefers that you report the owner’s Social Security number instead of the LLC’s federal employer identification number in this case.
Line 4 – Exemptions
Note that you do not need to fill in this section as an individual. Only certain businesses or entities with any reason for exemption need to fill out these spaces. But if this applies to you, you will need to provide a number or letter code that indicates the reason.
However, if your entity is exempt from backup withholding, you will fill in the first line with your code. This should apply to most entities. However, if your business is not, the company who hired your services will need to withhold income tax from your pay at a flat rate of 24 percent and send it to the IRS. This is known as backup withholding.
Additionally, if you are exempt from a reporting required by the Foreign Account Tax Compliance Act (FACTA), you will fill in the second line. The latter only applies if you hold your accounts outside the United States. 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.
Lines 5 – Address, city, state, and ZIP code
Provide your street address, city, state and zip code. What if your home address is different from your business address? Which address should you provide on form W-9? Use the address that you will use on your tax return. In this optional step, you can also choose to provide the requester’s name and address. You might want to fill out this box to keep a record of whom you provided your tax identification number.
Line 7 – Account number(s)
Another optional line is where you can fill in any account numbers your employer may need. Most individuals can leave this blank.
Part I – Taxpayer Identification Number (TIN)
Note that you have two options in this section. You can enter either your Social Security number (SSN) or your employer identification number (EIN). 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 resident alien and you are not eligible for a SSN, you should use your IRS individual taxpayer identification number (ITIN). Again, you may want to check with your tax advisor or contact the IRS directly to double check your information. Note that Providing an incorrect TIN can cause issues with your payments or tax return. It can also lead to future backup withholding.
Part II – Certification
You are expected to attest to the truthfulness of all of your information before you can sign form W-9. Intentionally lying on a tax form could mean you will have to pay a fine or go to jail; the IRS doesn’t mess around.
A W-9 form is a personal document and should be treated as such. So, if you are unsure, it is best to speak to a tax consultant for advice. There are a variety of W-9 scams that many people fall victim to; where you receive an email request to fill in the W-9 and that information is used by unscrupulous individuals.
Note that the IRS does not initiate contact with taxpayers via email. Never reply to an email or telephone call requesting you fill a W-9. A business should either ask you to fill out a paper copy or will assist you with accessing the electronic filing system that they are using.
Frequently Asked Questions
What Does A Filled Out W9 Look Like?
A filled out W9 provides personally identifying information like your name and address. A completely filled form acts as an agreement that you, as a contractor or freelancer, are responsible for withholding taxes from your income.
How Do You Obtain Your W9?
The W-9 can be downloaded from the IRS website, and the business must then provide a completed W-9 to every employer it works for to verify its EIN for reporting purposes.
What Is The Difference Between W4 And W9?
The difference between Form W-4 and Form W-9 is that Form W-4 is for employees and Form W-9 is for vendors, independent contractors, freelancers and other individuals who receive non-employee compensation from a company.
What Is A W9 Form Used For?
The W-9 is an official form furnished by the IRS for employers or other entities to verify the name, address, and tax identification number of an individual receiving income. The information taken from a W-9 form is often used to generate a 1099 tax form, which is required for income tax filing purposes.
How Do You Sign A W9 Electronically?
You have several options involving uploading the signature photo, drawing it on a touch screen and then copying, typing the signature and customizing its font, and photographing it with your device camera.
How Do You Send A W9 Electronically?
After filling your W9 correctly, you can direct it to the recipient in any convenient way: Regular mail or courier post office, Email, or you Bring it personally.
What Is W9 Vs W2?
Employers are expected to issue a W-2 form to every employee they pay $600 or more during a tax year.
A W-9, on the other hand, is a form you complete when you start working with someone on a freelance or contractor basis.
Does An LLC Need To Fill Out A W9?
Yes, if you are doing business with someone as an independent contractor, they may ask you to file a W-9. The W-9 form can be filled out by individuals, as well as corporations and limited liability companies, and there are specific sections on it pertaining to LLCs.
Does A W9 Have To Be Signed?
Maybe, because the certification instructions on the W-9 form state that generally for “payments other than interest and dividends, you are not required to sign the certification, but you must provide your correct TIN.” As most companies outside of the financial sector don’t deal with financial transactions, they can reduce the time and effort in obtaining W-9 forms by not requiring a signature.
What Is The Difference Between An I9 And A W9?
The I9 form is an official verification of identity and legal authorization to work for all paid employees. W9 is a form filled by third party companies such as independent contractors who provide services to companies, upon request from the respective company.
Why Would A Vendor Request A W9?
In general, W-9s are required only for business-to-business relationships where more than $600 is paid in the calendar year. The $600 rule applies to labour and services. For direct sales, a W-9 is required for total purchases over $5,000.
How Do You Fill Out A W9 If You Are An Individual?
- Print your name or business name in the space where it says “Name.” The name must match the name shown on your tax returns
- Check the box for “Individual/Sole proprietor” if you have not filed your taxes as a corporation, partnership or LLC
- Check the box for “Exempt payee” only if you are positive that you are exempt from backup withholding. The qualifications appear on the form under “Specific Instructions, Exempt Payee”
- Enter your current address in the space provided
- Enter your Social Security number in the space provided. This is your taxpayer identification number (TIN)
- Then sign and date the W-9 form. When you’re finished, provide the form to company or individual who issued it. Do not send the W-9 to the IRS
What Happens If You Don’t Fill Out A W9?
If you don’t fill out a W-9 duly requested by an employer, partner or other entity duly entitled to your taxpayer ID information, you may be penalized $50 for each instance. You may also be subject to backup withholding, which means the payor will withhold 28 percent of your check and forward the proceeds to the IRS.
Who Can Sign A W9?
The person who signs a W9 must be a “U.S. person.” That means that the signer must be an individual who is a U.S. citizen or a U.S. resident alien. The signer should have the organization’s consent to sign a W9 on its behalf, but consent can be oral or implied.
Do Independent Contractors Need To Fill Out A W9?
Yes, W-9 forms are for self-employed workers like freelancers, independent contractors and consultants.
Who Do You Send This W9 Form To After I Fill It Out?
Form W-9 is a one-page IRS information form that individuals and businesses use to send their taxpayer identification number to other individuals, clients, banks and other financial institutions.
What If I Refuse To Submit A W9?
If a vendor or contractor refuses to provide a W-9 when it’s requested, the Payee is subject to a penalty of $50 for each such failure.
What Is W9 Vs 1099?
The W-9 is the form that you will send to your contractors (or that will be sent to you by a general contractor or bank) to get their information. The 1099 is the form that you complete and issue to your contractors and the government at the end of the year.
What Information Is Required On The Form?
The W-9 is used to record the following information for an independent contractor or freelancer they are hiring:
- Contractor/freelancers name or business name (if different)
- Postal and/or physical address
- Type of business entity i.e. sole proprietorship, partnership, C Corporation, S Corporation, trust/estate, limited liability company or “other”
- Tax identification number (TIN); either an Employer Identification Number (EIN) or Social Security Number (SSN)
Can You Fill Out A W9 Form Online?
Yes, requester may establish a system for payees and payees’ agents to submit Forms W-9 electronically, including by fax.
What Is W9 Form 2021?
Form W9 in 2021 is used for the same purposes—to request the correct taxpayer identification number of the requested individual or the business. While many of the tax forms are renewed every year, Form W9 is likely to be the same as it is. Because Form W9 doesn’t need to specify a certain tax year, there is no reason for the IRS to renew the Request for Taxpayer Identification Number and Certification every year.
How Much Can You Make On A 1099 Before You Have To Claim It?
If you earn $600 or more as a self-employed or independent subcontractor for a business from any one source, the payer of that income must issue you a Form 1099-MISC detailing exactly what you were paid.
Do You Pay More Taxes As A 1099?
Yes, the IRS taxes 1099 contractors as self-employed. If you made more than $400, you need to pay self-employment tax. Self-employment taxes total roughly 15.3 percent, which includes Medicare and Social Security taxes.
Can You Refuse To Fill Out A W9?
Yes, you can refuse a request to fill out the W-9 but only if you are suspicious as to why a business has made the request. Be careful not to fill out the W-9 if the business does not have a legitimate reason to ask you to fill it out. If you are a full-time employee, it’s not necessary to fill out a W-9. It’s only required of independent contractors, freelancers and possibly part-time employees.
Does The IRS Need The W9 Form?
No, Form W-9 does not get sent to the IRS.
Is It Better To Be On Payroll Or 1099?
As a 1099 contractor, you receive more tax deductions like business mileage, meal deductions, home office expenses, and work phone and internet costs, as well as other business expenses that can lower your taxable income. Therefore, contractors might end up paying fewer taxes than a traditional employee would.
What Is Considered Rent On A 1099?
The Rents and Royalties section is used to report income received as a result of renting property or receiving royalties. Rental income is generally reported on a 1099-Misc Form, Box 1 or is paid directly to the landlord. Royalties are generally received through copyrights, patents, and oil, gas, or mineral properties.
You are allowed to report amounts of $600 or more for all types of rents, such as any of the following. Real estate rentals paid for office space. However, you do not have to report these payments on Form 1099-MISC if you paid them to a real estate agent or property manager.
Why Is Your Bank Asking For A W9?
Your bank will ask you to complete Form W9 in order to obtain your personal identifying information (name, address, tax ID) to report income paid to you to the IRS, such as interest, dividends, capital gains, cancellation of debt, royalties, rents, etc. or income paid by you to the institution.
What If A Company Refuses To Provide A W9?
When a company or individual fails to provide you with the required W-9 information needed, you must still submit the required 1099 forms. Upon completion, you can either leave the TIN/SSN field blank or write “Refused to Provide.”
The IRS will then send a notice requiring you to begin the backup withholding with a CP-2100 or CP-2100A letter. Please note you are required by the IRS to make at least three attempts to obtain the information and document all attempts for your records to avoid penalties from the IRS
What Is A W9 From A Landlord?
Form W-9 simply provides the landlord with your correct taxpayer identification number so that they can properly complete the Form 1099 required for interest earned on your security deposit.
How Do You File A 1099 Without A W9?
When a vendor has failed to provide the proper W-9 documentation, you are still allowed to process a year-end Form 1099-Misc form, reporting all income to the vendor. This allows the business to deduct the expenses properly. Since digital form formats won’t accept incomplete documentation, however, prepare a paper “Form 1099-Misc” manually.
Do Property Managers Need To Send 1099 To Owners?
Yes, if you use a property manager, you will need to file a Form 1099 for their service fees (not including reimbursed expenses). You must also supply a form W-9 to the property manager. The property management company will be responsible for issuing 1099s to all contractors they have hired to maintain your property.
How Does A W9 Affect Your Taxes?
In general, income that results from a W-9 arrangement is not subject to IRS withholding. Rather, it is the payee’s responsibility to claim the income on his or her tax return, and to pay any appropriate taxes.
What Are Income Payments On Form 1099?
Income payments on Form 1099 are payments made from a business to someone who’s not an employee of the company, such as other businesses, individuals, freelancers, subcontractors, independent contractors, or vendors.
How Much Should I Set Aside For Taxes 1099?
A rule-of-thumb percentage to be safe is to set aside 30 percent of your income.
How Much Tax Will I Pay On A W9?
The self-employment tax rate is 15.3 percent.
What Is An IRS 1099 Form?
A 1099 form reports income from self employment earnings, interest, dividends, government payments, and more.
38. Do You Have To Pay Taxes If I Fill Out A W9?
Under a W-9, the company will not withhold any taxes for you. You are responsible for ensuring the right amounts of taxes are paid to the IRS. And when it comes to Social Security and Medicare taxes, you have to pay both the employer and employee’s share.
39. If Someone Receives A Gratuity Do You Need To Fill Out A W9 Tax Form?
It depends on the amount of the gratuity and the context in which it is received. Gratuities received for providing services to a business would certainly fall under the 1099 reporting requirements and therefore a W9 form would be appropriate. Some businesses have a policy of requiring a W9 from every service provider before any payment in any amount is made.
40. How Do You Correctly Fill Out A W9 Tax Form As A Single Member LLC?
- Enter your name and the legal name of your limited liability company (LLC) on the first two lines of the W-9. On the first line, write the name you file your tax returns under and on the second line, enter the legal name of the LLC
- Enter business address, city, state and zip code
- Check the “Individual/sole proprietor/single member LLC” box – not the “limited liability company” box for your tax classification
- Enter your Social Security number. You must ideally use your SSN. However, the IRS allows you to enter an employee identification number (EIN) that you’ve obtained in your capacity as a sole proprietor
- Sign the certification and submit the W-9 form to the requester