W-9 Form: What Is It?
A W-9 form is used for tax filing purposes. This form is used to get information from a person who you may be hiring or an independent contractor you are planning on using. The W-9, or Request for Taxpayer Identification Number and Certification form, will provide the employer with personal information such as the employees name, address, social security number, and more.
The information on this form will be kept by the employer. It does not need to be sent in to the IRS. The information on the W-9 will be used later in order to fill out other tax filing forms, such as a W-2 or a 1099.
The W-9 form is an important tool for employers to gather information about independent contractors or other employees. Verifying the information on this form and keeping it up to date will ensure you have the correct personal information on file when comes time to file taxes and send out other tax forms.
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Why you need a W-9 Form
It is a popular myth that independent contractors and freelancers are just that - free. That self-employment somehow erases the drudgery of filing taxes and watching one's income shrink. However, this could not be less true. An independent contractor has just as much tax rigmarole to deal with as an employee. The process of reporting freelance income is different than that of reporting employee income, but it's a still a process. This article is addresses the first step of this process, the first form of independent contractor payment relationships - the W-9.
Here's a run-down of how it works for both independent contractor and employer:
IF YOU'RE AN INDEPENDENT CONTRACTOR -
1. Your employer will ask you to fill out and return a W-9 form. On it, you will need to provide your full legal name, address, and Taxpayer ID number. Be sure that double-check all your information; you can even check permanent information against last year's returns or other official documents to be sure all details are consistent. One very important note: be sure that you submit the finished W-9 to your EMPLOYER - NOT the IRS.
2. If you earn over $600 with an employer during the tax year, he or she will use the W-9 information to fill out a 1099. The 1099 is essentially a simplified W-2 that only reports gross income, but. You will need this form to file your own taxes, so don't be afraid to (politely) pester your employer for a copy if need be/
3. If you earn under $600 during the tax year, you won't need a 1099. However, you will still have to fill out a W-9, and also report your income. No sum is too small for the hunger of the Self-Employment Tax!
IF YOU'RE AN EMPLOYER-
1. Have each independent contractor you take on fill out a W-9. This should be done as early as possible, ideally during the time of hire. If a contractor is taking forever to get the w9 form back, don't be shy about nagging. The IRS tends to be suspicious of independent contractors, so lag-time can potentially mark your company for an audit. And everyone knows how much fun that is.
2. If you've hired someone new to independent contracting, be sure that you hammer it home that they need to give you the W-9 Form. not the IRS. You'd be surprised how many newcomers mess this up.
3. If a contractor earns more than $600 from you during the tax year, you'll need to report his or her income using a 1099 form. You can download one of these from the IRS website and fill out the 1099 using the information provided in the W-9.
4. Submit one copy of the 1099 to the IRS and one copy to the contractor. Be sure not to forget about the contractor's copy - he or she will need that form during tax season!
Overview of the Fields in a W-9 Form
Form W-9, also known as the Request for Taxpayer Identification Number (TIN) and Certification, is used by a person in the U.S. to give his or her correct TIN to the person requesting it. This tax form certifies that the TIN being given is correct (or that the person is waiting for a number to be issued), that the person is not subject to backup withholding, or that the person is claiming exemption from backup withholding if he or she is an exempt payee. If you intend to employ people to work for you, there is an excellent chance that you will need to issue a W9 form to those individuals. Furthermore, if you intend to work for an employer, you will likely need to complete this same form. Interestingly, the employer is not required to submit the form to the Internal Revenue Service; instead, they should keep it on file and use the information on the form when it comes time to prepare the employee's information returns. Employers can get paper copies of the W-9 form by calling 1-800-TAX-FORM to request them. However, it might be easier and more convenient for an employer to locate a W9 online. To get a W-9 online, simple log on to www.irs.gov and enter the document name into the search box on the page. Yet another alternative is for the employer to create his or her own "substitute" form, which is permitted as long as certain conditions are met and the form contains all of the necessary fields.
Speaking of those fields, it is important for both employers and employees to familiarize themselves with the fields (fillable parts) contained in the W-9 form. Here we will refer to the fields contained in the standard W-9 issued by the IRS rather than a homemade or "substitute" W-9. At the top of the IRS W-9 Form, under the words "Request for Taxpayer Identification Number and Certification," you will find a field for the employee to write or type his or her full name. Directly underneath the name field, there is the business name field; individuals who are simply working under his or her regular name typically disregard this field. Then, under the business name field, is a large box containing a number of checkboxes. This box is the federal tax classification field, and despite its large size, it is quite possibly the easiest field to complete because it only requires the worker to check the box that applies to him or her. For many individual workers, this will mean checking the box that says, "Individual/sole proprietor."
To the right of the federal tax classification field is the exemptions field, in which the worker would fill in any code(s) that may apply to that person if he or she is exempt from backup withholding and/or FATCA reporting. Next, going down the form, next you will find the fields in which to fill the employee's street address and city/state/zip code. Adjacent to those fields are an optional field to the right for the requester's name and address and an optional field below for any account number(s).
The final fields are located below the aforementioned fields, and they are the taxpayer identification number (TIN) field and the certification field. The TIN field is where most working individuals will enter their Social Security number, though some entities will enter their employer identification number (EIN) instead. The last fillable field, which is the certification field, merely requires the employee's signature and the date in which the W9 form is being signed.
Good news: One you've reached the certification field, that's the last of the fields on the form. The W-9 form is, you must surely agree, not the most complicated tax form. Just take it one field at a time, and you'll have the W-9 form completed in no time.
Instructions for Filing a W-9 Form
Filing tax forms can be confusing at times, and the Form W-9 is no exception. This particular form, also known as the Request for Taxpayer Identification Number (TIN) and Certification, is to be used by an individual in the United States for the purpose of providing his or her correct TIN to the person requesting it. The W-9 certifies that the correct TIN is being given (or that the individual is waiting for a number to be issued), that the individual is not subject to backup withholding, or, if he or she is an exempt payee, that the individual is claiming exemption from backup withholding. Employers are often very familiar with the W-9 form, as they are typically required to issue the form to people they've hired. Prospective employees, in turn, will usually become familiar with the form because they will typically receive one and will need to complete it.
Employees do not need to worry about acquiring copies of the Form W9, as it is the employer's responsibility to get copies of this form and provide one to each prospective employee. Employers, on the other hand, will benefit from knowing where to get copies of Form W-9. One method is to acquire paper copies of the W-9 form by calling a special toll-free telephone number, 1-800-TAX-FORM, to request them. In today's tech-infused world, however, many employers will prefer to look for copies of the W-9 online. It is actually not a difficult process to find a W-9 online, but it does require a couple of steps. The first step is to go online and log on to www.irs.gov (the official website of the Internal Revenue Service). The next step is to find the search box on the page enter the keyword into it; this will yield a link to the PDF document. There is still another alternative, though it is not used very often: Employers can create their own "substitute" W-9 form instead of using the form created by the IRS. This is allowed as long as a number of conditions are met, and the form must essentially contain the same fields as the version provided by the IRS.
Completing the form, which is done by the employee, is not a difficult process. After filling in the fields indicating the prospective employee's name, business name (if applicable), street address, and city/state/zip code, he or she should check the appropriate box for his or her federal tax classification (individual/sole proprietor, C corporation, S corporation, etc.). If any exemptions apply, the employee should complete the required information in the exemptions field, as well. Then there are a couple of optional fields, which may be left blank: one for account numbers, and the other for the requester's name and address. The final two fields, which are not optional, are the field for the taxpayer identification number (TIN)—which is usually a Social Security number but might sometimes be an Employer Identification Number (EIN)—and the certification field, which only requires a signature and the current date.
In regard to filing out the form, there's a bit of good news: Employers are not required to submit the W-9 to the IRS. Rather, they will need to keep the completed W-9 form on file, as they will probably need to use the information from that form during tax season, when the time comes to prepare the employee's information returns. The IRS is quite clear on this, as it states at the top of the form: "Give Form to the requester. Do not send to the IRS." Thus, while the prospective employee will need to "file" the W9 by completing it and handing it to the requester, the requester should simply "file" it away in a safe place. So, as far as filing tax forms with the government goes, the W-9 is one less thing for the employers—and the IRS—to worry about.