What Is IRS Form W-9 and How to Fill it Out in 2022?
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For many employers, taxes represent the biggest concern, since the consequences of not filing them properly can be tough for the payer. Questions arise: what tax forms do I need? Do I submit this to the IRS or keep it in my records? Did I calculate the tax withholding amounts correctly?
We wanted to remove at least one worry off your plate, so we've prepared this comprehensive guide that will clear your doubts around filling out Form W-9 correctly.
The IRS's Form W-9, Request for Taxpayer Identification Number and Certification, is a tax form used by US businesses to get information from independent contractors (or freelancers) based in the United States.
What is IRS Form W-9?
Form W-9 is used to collect the name, address, and Social Security number or tax identification number (TIN) of any US entity (person or business) that is receiving income that you'll need to report to the IRS.
Although businesses in the United States working with independent contractors do not withhold income tax or provide benefits (such as Medicare or Social Security, which regular employees do receive), the IRS still wants to know how much the contractors received to ensure they are properly reporting their income. For that purpose, a business needs to file an information return through a Form 1099-NEC when they pay a contractor more than $600 in a year.
Keep in mind Form W-9 is used only for service providers in the United States. If a business hires an independent contractor located outside of the United States, they collect Form W-8BEN (for individuals) or W-8BEN-E (for entities) instead.
The IRS occasionally makes revisions to tax forms, but the W-9 has stayed the same since its last revision in 2018. You can download the Form W-9 from the official IRS website or watch a video with guidelines regarding filling out this form. This form is not submitted to the IRS by either party, but returned to the hiring party by the contractor.
What is Form W-9 used for?
Use Form W-9 to provide the Taxpayer Identification Number (TIN) of the person (or business) who is required to file an information return with the IRS report. Use Form W-9 if you:
- Received income within a tax year
- Had real estate transactions (so you can get a 1099-S)
- Paid interest on a home mortgage or student loan (so you can get a 1098 form)
- Acquired or abandoned a secured property (so you can get a 1099-A
- Had debt cancelled (so you can get a 1099-C)
- Made contributions to an IRA
Who needs to collect IRS Form W-9?
Every business based in the United States who has contracted a domestic independent contractor needs to collect a completed Form W-9. A domestic person is a US person defined as such for tax purposes. You don't need to file this form to the IRS, but only keep a record of it.
So, if you pay individuals or small businesses to complete specific services for you without employing them, you're in an obligation to collect this form.
Who needs to fill in IRS Form W-9?
Every independent contractor (usually working as a sole proprietor or self-employed) in the United States needs to fill in the information return through Form W-9.
A client, bank, or financial institution will most likely ask you to fill in Form W-9. You don't need to file this form to the IRS, but only return it to the requester and keep a record of it.
Keep in mind this form is only used if you are not hired as an employee. If you are an employee, you fill in Form W-4 instead.
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When is the deadline to collect IRS Form W-9?
There is no official due date to collect Form W-9, but it's usually easiest to get this completed and filed before the first payment is made. That way, you're not scrambling to get the required information during tax season.
How do I get Form W-9?
If you determine you need to complete Form W-9, you can download it from the official IRS website. You can use a printed or an electronic version.
How to fill out IRS Form W-9?
If you need help filling out Form W-9, you can follow the instructions below:
Enter your legally given name as shown on your income tax return or other tax documents.
Enter Business Name/Disregarded Entity Name. You can choose from the following:
- Sole proprietor/single-member LLC. This applies to you if you're doing business but don't have a business partner (you're acting as an individual) and in case you haven't incorporated your business.
- C corporation. This applies to you if your business has shareholders and a board of directors, and you pay taxes separately from the business owners.
- S corporation. This applies to you if your business doesn't pay corporate income tax, but rather business shareholders split up the income and report it on their own personal income tax returns.
- Partnership. This applies to you if your business isn't incorporated but rather has shared ownership with other people.
- Limited liability company (LLC). This applies to you if your business behaves like a corporation (state level) but is taxed like a partnership or sole proprietorship (federal level)
- Other. This one applies to you if you are filing the Form W-9 outside the United States. Check out the IRS's guide to international business entities for more information.
Check the appropriate box to state the type of business entity for federal tax classification: sole proprietorship, partnership, C corporation, S corporation, trust/estate, limited liability company, or "other". If you aren't sure, it's most probably sole proprietorship.
Exemptions. These only apply to entities, so if you are an individual, leave this empty. Detailed exemption cases are described in the instructions on page 3, but some of them could be either payees who are exempt from backup withholding (corporations, for example) or payees who are exempt from reporting under the Foreign Account Tax Compliance Act (FATCA). If you are an independent contractor or a freelancer, this doesn't apply to you.
Boxes 5 and 6
Enter your street address, city, state, and ZIP code. In case you have different addresses for home and business, state the one that you will use on your tax return. If you are a sole proprietor who rents office space, but you put your home address in the income tax return, you should enter your home address. This is to make sure the IRS can match your tax forms properly.
On the right, you will find a field called "Requester's name and address". This is optional, but it could be a good idea to keep track of who you're sending this Form W-9 to.
Enter your business's tax identification number. If you are acting as an individual (sole proprietor or freelancer), you should enter your Social Security Number (SSN). If you are acting as another business entity, you should enter your Employer Identification Number (EIN).
There is a chance you are a sole proprietor who has an Employer Identification Number, but sometimes it's better to put your Social Security Number instead; this will give the IRS to match any Forms 1099 you receive with your tax return (these are filled with your SSN).
In case you have a newly-established business entity and still don't have the Employer Identification Number, the IRS suggests you apply for it as soon as possible and state "Applied for". You may be subject to backup withholding in the meantime. If you aren't eligible for an SSN because you're a resident alien, your IRS individual taxpayer identification number (ITIN) instead.
Part II, Certification
Here, you must confirm the truthfulness of the information entered in the form above. Giving incorrect information can expose you to serious legal risks. Before you sign and complete the Form W-9, confirm the following:
- The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me). Never use a made-up or someone else's tax ID number.
- I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding.
Most taxpayers are exempt from backup withholding, so if the IRS hasn't notified you about it, you're in the clear. If you are not exempt from backup withholding, the company that hired you will need to withhold income tax from your pay at a rate of 24%.
- I am a U.S. citizen or other U.S. person. According to the IRS, a "U.S. person is a partnership, corporation, company or association created or organized in the United States or under the laws of the United States; a domestic estate; and a domestic trust. If you are a resident alien, you are good to go. Just a reminder, if you are not a U.S. citizen, fill in IRS Form W-8BEN (as a foreign individual) or Form W-8BEN-E (as a foreign entity) instead.
- The FATCA code(s) entered on this form (if any) indicating that I am exempt from FATCA reporting is correct. Ignore if you left Box 4 blank.
To complete the form, sign it with your full (legal) name and the date.
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Disclaimer: This article is to be used for informational purposes only and should not be considered tax advice. Check the official IRS website (irs.gov) for the latest information or seek advice from a tax professional.