What Is a W-9?
IRS Form W-9 is typically reserved for independent contractors, self-employed workers, and consultants. If you are a business owner and you pay independent contractors more than $600 dollars during the tax year, you’re required to report these payments to the IRS by filing Form 1099-MISC. The information provided on Form W-9 allows business owners to keep track of whom they’re paying and what information they need to provide to the IRS.
Businesses who hire independent contractors aren’t obligated to pay for Medicare, take out Social Security taxes, or withhold income taxes on their behalf. If you’re an independent contractor or self-employed individual, this is your responsibility. Even though this information isn’t required in a W-9, the IRS still needs to know how much income the individual is making to determine their tax debt.
What Information Do I Need to Fill Out a W-9?
The instructions on IRS Form W-9 are straight forward. If you are an independent contractor, you must report your name, provide your Social Security number, and verify whether you are exempt from backup withholding taxes. If the contractor is not exempt from backup withholding, the business must withhold income tax from their contractor’s pay at a rate of 28 percent and send it directly to the IRS. The business entity is required to report the name of their business, what type of business it is, and their tax identification number. If you are self-employed, this is your social security number.
What Should I Be Aware of When Filling Out IRS Form W-9?
Whether you’re a contractor or a business owner, you should be wary when handling a W-9 form. This form contains sensitive tax information including tax identification numbers and Social Security numbers, so it’s important to keep it safe from identity thieves. If you’re a contractor, take extra precaution when you receive a W-9 by identifying the source.
What If I Don’t Recognize Where the W-9 Came From?
If you don’t recognize the name of the business or individual who sent you the W-9 form, don’t fill it out until you have more information. If you were recently hired for a job, confirm with the employer where the form is coming from and why they need it. If you received the form digitally, contact the source and ask for more information. If they refuse to answer your questions or give you vague answers, don’t give them your information. One way to do this is to ask your employer what types of tax documents they plan to send you so you know what to expect.
You might receive Form W-9 from businesspeople like landlords. Form W-9 is used as a certifiable document that records basic information so they can file accurate taxes with the IRS. If you feel uncomfortable about the source of the W-9 you received, you should contact a tax professional from Community Tax. We’ll assign one of our tax professionals to you and they’ll give you advice on how to proceed.
Use a Secured Method of Delivery
Secured methods of delivery include mail, hand delivery, or an encrypted email attachment. Never send a form as an unencrypted email attachment, as these can get easily hacked by identity thieves.
What If I Expected a W-4 But Got a W-9 Instead?
When you receive your tax documents to complete for the first time, double check to see whether you’re filling out a W-4 or W-9. If you received a W-9 and didn’t expect it, clarify whether you’re being hired as an employee or an independent contractor. Some employers attempt to hire people as an independent contractor to save money, even though they were promised to be hired as an employee. Employees fill out W-4 forms, and independent contractors file a W-9. A W-4 form is meant to set up the employee’s backup tax withholdings, while the W-9 makes the contractor responsible for their withholdings on their own. This is why contractors are cheaper for businesses.
What If I’m Subject to Mandatory Backup Tax Withholding?
There are two main reasons why a person may be subject to mandatory backup tax withholding. You may be under backup tax withholding if you owe back taxes to the IRS, and you’ll remain in withholding until the debt is paid in full. Another reason may be that your Social Security number and name don’t match IRS records. If you know you don’t have tax debt, review your records and determine whether your information is correct. If there’s a mistake on your tax return, notify the IRS immediately and amend your return using Form 1040X to ensure you don’t qualify for backup tax withholding.
Should I Hire a Tax Professional For Help?
If you want to save money, avoid penalties, and prepare for a better financial future, a tax expert from Community Tax can help you every step of the way. We understand that receiving new tax documents can be overwhelming, and our professionals can walk you through the process and answer any questions you may have. Don’t get caught in an unexpected situation with the IRS. Call us and we’ll create a strategy to help you avoid debt and maximize your deductions.
As an independent contractor, you must take full responsibility over your additional payments. With one of our tax advocates by your side, you can rest assured that your taxes are in good hands. Whether you’re an individual who wants someone to prepare your taxes, or you’re self-employed and need a bookkeeper to take care of the checks and balances, we offer a wide variety of financial services to keep you on track with your financial goals. Get a free consultation today by calling us today.