IRS Form W-9, also known as the Request for Taxpayer Identification and Certification, is a unique tax form because it’s never actually submitted to the IRS—not directly, anyway.
You may have to fill out Form W-9 if you’re an independent contractor or self-employed worker. If you’ve hired a contractor or freelancer, then you may have to request Form W-9 from those workers.
What’s the purpose of Form W-9? And how do you know if it’s something you need to handle? Let’s review the ins and outs of this tax form.
What Is a W-9?
IRS Form W-9 typically needs to be filled out by independent contractors, self-employed workers, and consultants. Form W-9 includes the worker’s:
- Taxpayer Identification Number (TIN)
- Social Security Number (SSN)
- Employee Identification Number (EIN)
In today’s gig economy, Form W-9 is more prevalent than ever since there’s such a large amount of self-employed workers, from contractors to freelancers.
The Purpose of a W-9 Form
If you’re a self-employed worker, then the person or business that hires you will typically ask you to fill out Form W-9. Businesses that pay independent contractors more than $600 during the tax year must report these payments to the IRS on Form 1099-MISC. The information provided on Form W-9 allows business owners to keep track of whom they’re paying and provides them with all the information they need to complete Form 1099-MISC.
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.
If you’re a business owner or employer, it’s your responsibility to collect Form W-9 from independent contractors you’ve hired (to whom you’ve paid more than $600 during the tax year).
Information Required 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.
How to Fill Out Form W-9
Let’s walk you through the process of filling out Form W-9.
- Step 1: Enter your name as shown on your tax return.
- Step 2: If your independent contracting goes by a business name, enter that business name here.
- Step 3: Enter the type of business entity you are (most self-employed workers are sole proprietorships)
- Step 4: State your exemptions. Most people will probably leave this section blank, unless you’re exempt from backup withholding.
- Step 5: Provide your street address, city, state, and zip code. If your home address is different from your business address, use the address that you’re going to use on your personal tax return.
- Step 6: This is an optional section where you can fill in the name of the person or business requesting your W-9 form. It’s best to do so for record-keeping purposes.
- Step 7: The Form W-9 instructions refer to this step as “Part I.” If you’re a sole proprietorship, enter your social security number. If you’re another type of business entity, enter your tax identification number. You might not have a tax identification number yet if you’re a new business, so write “applied for” if that’s the case. But you should try and get your tax identification number as soon as possible because you’ll be subject to backup withholding until you do.
Step 8: Step 8 is referred to as “Part II.” You’ll have a series of statements to assign to attest that everything you’ve entered on your W-9 form is truthful.
Exercise Caution When Filling Out IRS Form W-9
You should be wary when handling a W-9 form, whether you’re a contractor or employer. Form W-9 contains sensitive tax information, including tax identification numbers and Social Security numbers, so it’s important to keep it safe from identity theft. If you’re a contractor, take extra precaution when you receive a W-9 by identifying the source.
As an employer, it’s your responsibility to retain a contractor’s Form W-9 in a safe place.
What If I Don’t Recognize Where the W-9 Came From?
Form W-9 is used as a certifiable document that records basic information so they can file accurate taxes with the IRS. But since there’s lots of sensitive personal information that’s included on Form W-9, it’s a popular device for people trying to commit fraud or identity theft.
Here are a couple red flags to watch for:
- 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 expected Form W-4 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.
- You’re asked to complete Form W-9 over the phone. You should fill out a physical or digital copy of Form W-9—don’t let anyone fill it out for you over the phone, because this is something that fraudsters do. Always confirm with the person/business hiring your services that they did indeed request for you to fill out Form W-9.
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
Try and deliver your W-9 form via a secured delivery method. Secured delivery methods 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’m Subject to Mandatory Backup Tax Withholding?
Backup withholding is when 28% of payments made to you are remitted directly to the IRS.
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.
Your Responsibilities as an Independent Contractor or Freelancer
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.