The IRS Form W-9 is a request for TIN and certification. Businesses use this form to get information about vendors they hire as contractors. The data gathered from W-9 is used in the future to file tax returns.
The IRS has a strict rule stating that if businesses pay $600 or more to contractors, they have to report these payments to the IRS. Businesses use Form 1099-MISC to report payments. To properly report payments, companies request a W-9 from contractors. The W-9 should contain the contractor’s name, address, TIN, and Social Security number.
The business sends a W-9 to a contractor but not to the IRS. The purpose of the W-9 is to make sure businesses and contractors correctly file taxes. Companies working with contractors don’t withhold income tax or pay Social Security and Medicare taxes. Contractors aren’t employees, so they don’t receive the W-2 form. Instead, they get the W-9.
The IRS needs information about contractors’ income to make sure they file their taxes. That’s why businesses send W-9 to contractors, and at the end of a tax year, they send 1099-MISC based on the contractor’s W-9 to the IRS. Keep reading the article to figure out whether you should receive Form W-9
Understanding W-9 Form
W-9 is a one-page form. Every company has to send it to contractors who get $600 or more for their services. You receive the W-9 from a company and have to fill it out to send it back to this company.
W-9 has to include information about your business, TIN (taxpayer identification numb), and other important details. Neither you nor the company you worked for has to send the W9 or its copy to the IRS.
You return the filled-out W9 to a company requesting it to get Form 1099 closer to the end of the tax year. 1099 is based on your income and information from a W-9. You have to submit 1099 to the IRS to file tax returns.
Who Needs to Fill Out W9 Form?
The IRS determines four common occurrences when taxpayers receive W-9:
- Contractors, consultants, freelancers that plan to get $600 or more from a client (company) during a specific tax year. The client sends W-9, and the taxpayers mentioned above must fill it out and return it to the client.
- Taxpayers get W9 from banks when opening a new account.
- Banks and other financial institutions send W-9 to taxpayers to then submit 1099 forms to the IRS.
- Institutions that give loans send W-9 to taxpayers when they forgive debts. Forgiving debt is considered as income, so the IRS needs information on that.
Be careful with W9 and double-check whether it was your client who sent the form. In some cases, criminals send the W9, filling out the form will lead to identity theft. Protect your information to avoid trouble.
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When Shouldn’t Contractors Fill Out the Form?
There are quite a few cases when you should think twice before filling out the form. One has been mentioned – when criminals are trying to get information about the business. But at least two more cases occur when you’re not required to fill out W9:
- An independent contractor unexpectedly receives a W9 from a bank or a financial institution to report dividends or interest. This institution should already have the contractor’s tax number since they have an account.
- If a person is officially employed and receives a W9 from the employer. Only independent contractors receive W9, and official employees receive W2. The difference is huge, and a taxpayer definitely shouldn’t fill the W9.
Always double-check who sends a W9 since filling it out means sharing valuable information.
How to Fill Out W9 Form?
As mentioned, W9 is a one-page form. It’s not difficult to fill out the form. You need to follow the instructions.
Top of W9:
- Add the name as on the income tax return.
- Add the business name if it’s registered differently from your name.
- Add details about the federal tax classification for the person in the first line. Check only one box.
- Add exemption codes if possible.
- Add business’s city, state, zip code.
- Add business’s full address, including apartment number.
- Add account numbers if possible.
This was part I of the form, when you complete it, then do parts II and III. Part II includes the Social Security Number and the Taxpayer Identification Number. Part III requires adding the date of filling the form. Then sign the form.
How to Securely Submit W9?
As mentioned, W9 contains valuable information, and it’s essential to keep it protected. The best way to securely submit W9 is to give it in person.
If it’s impossible to give the form in person, consider using online services to encrypt W-9. Upon finishing encrypting the form, you can safely send it to the client requesting a W-9 via email. Experts also recommend using encrypted file-sharing services to send W9.
If none of the above-mentioned options are available, you can consider postal service or services like UPS, FedEx, etc. Note there is no guarantee that W9 won’t be stolen or lost.
Experts also recommend asking clients beforehand about their methods of storing data. In some cases, information is stolen through clients.
A W9 is important to file your taxes. You shouldn’t ignore the form when you get one, but double-check if it’s from a client. Protect your information by checking if the request is reasonable.
Author: Charles Lutwidge