The Internal Revenue Service (IRS) has introduced several forms and documents in the United States to keep track of taxes. Form W-9 is one of them.
This form is used by the US income tax system for a third party who should file an information return with the IRS. It covers information related to the name, address, and identification information of the taxpayer.
This simple form has important information to be supplied to another individual, financial organization, or bank. So, assuming you're eligible, it's wise to know everything about Form W-9 and how you should fill it.
Form W-9 is a simple IRS document that lets you send your Tax Identification Number (TIN) to a person, organization, or bank. Your TIN can be the employer identification number (EIN) or social security number (SSN).
This document can be considered as an “information return” form as it provides someone with relevant information about a taxpayer. You need not send the W-9 to the IRS; it is meant for your employer or client so they can accurately report their expenses.
Now, you must know exactly whom to send the W-9 form and why. But before that, let's find out whether you have to fill out the W-9 form at all.
Not everyone requires a W-9 form for their daily business. You only need to fill out and send this form to someone in these four situations.
- You should fill out a W-9 if you are a freelancer, independent contractor, or consultant who earns more than $600 from a single project or client over a tax year. In this case, you need to send a completed form to your client to get Form 1099-Misc and file for income tax returns to the IRS.
- If you are opening a bank account, you might be asked to fill out a W-9 form by the bank.
- In case you invest money with a bank or another financial institution, you might need a W-9 or other types of 1099 forms. These documents report information like distributions, proceeds, or interest income from real estate transactions as well.
- If you owe someone a debt and they decide to cancel or forgive it, you need to provide a W-9 certificate to them so they can file tax returns effectively.
Apart from these scenarios, be very careful about sending someone a W-9 form as it might be a security breach for your personal information.
Now that you know who is required to fill out a W-9, you must be aware of situations in which you should not send someone this form, even if they ask for it.
This is because the form contains your social security number and TIN, which can be misused by nefarious people. Often, scammers use these tactics to collect personal information. So, you should be extra careful before sharing this information.
- You should not send a W-9 if you have received it from someone who is not your client or has no business association with you. This includes friends, acquaintances, and strangers.
- If someone unrelated to the client has sent you a W-9 form, ask them probing questions. Find out which forms they intend to send you in return and exactly why they need this form. If you are not convinced by their response, consult a tax professional before choosing to provide the information.
- Even your employer does not need to have access to your W-9 information. So, do not send it to them without proper verification. Ideally, they should deal with a W-4 unless you are an independent contractor. If you have a full-time job as an employee, you need not provide a W-9.
Your personal information must be at your own discretion and should be divulged only in legitimate and secure circumstances.
You can get a W-9 form from a client, bank, or other financial institutions. This is applicable only in case your income exceeds a certain amount, and you are eligible to fill it out.
You can also get a PDF version of the W-9 from the IRS website. The one-page document has accompanying instructions that are five-page long. You only need to fill out the part that requires information.
It is fairly simple to fill out a W-9 form. Just follow the instructions below.
1. At the top, you will find space to mention your legal name, just as it appears in your tax return statements. If you operate under your business name, write it here.
2. The next part asks what kind of business entity you have. For that, you have seven options:
- Sole proprietor/Single-member LLC: For people without business partners or ones without a corporation
- C Corporation: Businesses with shareholders and board of directors that files taxes separately from the owners
- S Corporation: For an incorporated flow-through entity that pays taxes once
- Partnership: If unincorporated business owners with one or multiple partners
- Trust/Estate: With trustees that can hold assets
- Limited Liability Company (LLC): For companies that are corporations at the state level but hold sole proprietorship or partnership for federal taxes, Basics of LLC form and understand how this works.
- Other: For people outside the US or international businesses that don’t fit into American taxation
3. Next, enter your contact information on the W-9 form.
4. If your business has employees or operates as a partnership firm or corporation, you may need to input an employer identification number (EIN).
5. If this doesn’t apply to you, you can use your social security number for the form.
6. If you are not eligible for a social security number or are a resident alien, you can provide your TIN as the IRS individual taxpayer identification number.
7. After entering all the details, sign and date the form to certify that all provided information is accurate as per your knowledge.
Once you know how to fill out a W-9, the next question is when to send it. As said earlier, your W-9 form is required in very specific cases.
You need to send the W-9 to get Form 1099 from the person asking. This is because Form 1099 is required to report different kinds of income to the IRS. That includes income from freelancing, contract jobs, and other self-employment avenues.
Both these forms benefit you greatly while filing taxes, so make sure you have them ready on time. Failure to submit your W-9 before the deadline or provide correct information can lead to a $50 penalty.
Do you know: W4 form is is an Internal Revenue Service (IRS) tax form that is filled out by employees to indicate their tax situation to their employer.
If you’re the one in need of collecting the W-9 forms, ensure you send them well on time to meet the 1099 deadline. The 1099-Misc deadline is January 31st, and the other 1099 forms are also due around that time.
Here are some ways you can get people to file their W-9 tax forms:
- Consider sending your contractors the W-9 form well in advance, even if their billing amount is lower than $600.
- You can also make it a rule to collect the W-9 form before issuing payments to contractors so that the procedure gets completed on time.
Form W-9 affects the tax filing and returns process and is beneficial to you as well as your client. The best practice is to send this form on time to the concerned individuals or companies to avoid delays or penalties.
But for some small business owners, scrambling to meet deadlines doesn't leave any room for creative pursuits. Luckily, a professional bookkeeping service like Fincent manages your finances so you can nourish your creative spirit and boost your business.