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Internal Revenue Service (IRS) Form W-9 or Request for Taxpayer Identification Number and Certification is a tax form used by U.S. businesses to get information from independent contractors (or freelancers) they hire for services and who are based in the United States.
IRS Form W-9 Form contains the name, address, and Social Security number or tax identification number (TIN) of a contractor. This form is not submitted to the IRS by either party but returned to the hiring party by the contractor.
Although businesses in the United States working with independent contractors do not withhold income tax or provide benefits (as they would for their regular employees), the IRS still wants to know how much the independent contractors received to ensure they pay the taxes. For that purpose, a business needs to file an information return through a Form 1099-NEC. Until 2020, the form used to report non-employee compensation was Form 1099-MISC.
Keep in mind Form W-9 is used only for service providers in the United States. If a business is hiring an independent contractor outside of the United States, they need to collect the Form W-8BEN (for individuals) or W-8BEN-E Form (for entities).
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. Keep in mind this is only used if you are not hired as an employee. If you are an employee, you need to fill in Form W-4 instead. A client, a bank, or other 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.
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 the 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.
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
- Paid Mortgage interest
- Acquired or abandoned a secured property
- For Cancellation of debt
- Made contributions to an IRA
When is the deadline to collect IRS Form W-9?
There is no official due date to collect Form W-9, but nonetheless you should collect is as soon as possible to keep your records clean. It is advisable to collect both this and Form 1099-MISC or 1099-NEC at the same time.
How to fill out IRS Form W-9?
Box 1: Enter your legally given name as shown on your income tax return or other tax documents.
Box 2: 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.
Box 3: 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.
Box 4: 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.
Box 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. Requester's information is optional, but it could be a good idea to keep track of who you're sending this Form W-9 to.
Part I: 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 suppest you apply for it as soon as possible and state "Applied for". Until you have the EIN, you can be subject to backup withholding, so make sure you obtain it as quickly as possible. 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. The IRS is very strict, and giving incorrect information can expose you to serious risks, including fines or even jail time. Before you sign and complete the Form W-9, you need to confirm the following, under the penalty of perjury:
- 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, you need to fill in the IRS Form W-8BEN (as a foreign individual) or Form W-8BEN-E (as a foreign entity).
- The FATCA code(s) entered on this form (if any) indicating that I am exempt from FATCA reporting is correct. We already mentioned what FATCA means in the section above.
To complete the Form W-9, sign it with your full (legal) name and fill in the date of signature.
Disclaimer: This article is to be used for informational purposes only and should by no means be considered as tax advice. Always check the official IRS website (irs.gov) for the latest information, or seek advice from a tax professional.