What Is a W-9 Form, and When Do I Need One?
Instead, the information is kept on file by the employer and used to prepare year-end tax documents such as IRS Form 1099-NEC, which is sent to both the contract employee and Uncle Sam when tax time comes around. However, if you are an employee of a business, you should fill out Form W-4, Employee’s Withholding Certificate, instead. Businesses withhold federal and state income taxes, Social Security taxes, and Medicare taxes for their employees and pay the taxes on their behalf. More traditional employees will fill out a W-4 at the start of their employment. This form collects information used to calculate tax withholding (the amount of income tax that an employer withholds from an employee’s paycheck). A worker with W-9 status will not have income taxes withheld from their payments.
All payees listed in items 1 through 4 and 6 through 11 are exempt. A person registered under the Investment Advisers Act of 1940 who regularly acts as a broker is also exempt. The taxpayer identification number section requires particular attention. Providing either a Social Security Number or Employer Identification Number accurately prevents penalties and ensures smooth processing.
Establishing U.S. Status for Purposes of Chapter 3 and Chapter 4 Withholding
Any employer may use the Spanish-language form and instructions as a translation tool. For more information on foreign payees, see the Instructions for the Requester of Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY. In the cases below, the following person must be the one that provides the Form W-9 to the payor for purposes of establishing its non-foreign status. Advise foreign persons to use the appropriateForm W-8 or Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual. If the transferee fails to withhold, the partnership is required to withhold from distributions to the transferee a tax (equal to the amount the transferee failed to withhold, plus interest). The Certification section in Part II of Form W-9 includes certification relating to FATCA reporting.
Filling Out a W-9 Form: Steps and Mistakes to Avoid
The W-4 is used by the employer to determine how much federal income tax should be withheld from the employee’s paycheck and reported to the IRS. As opposed to needing this from an external party, a company seeks out a W-4 from its own internal team. Form W-9 tells you to cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest w-9 and dividends on your tax return.
- This is particularly beneficial for businesses working with multiple independent contractors, reducing errors in issuing 1099 forms.
- Unlike some other IRS tax forms, they will not file it with the IRS.
- W-9 forms are not used for employees; they must complete a W-4 form at hire to give their taxpayer ID number and other information for tax purposes.
- Similarly, financial institutions may request a W-9 from account holders to report interest income.
- The W-9 facilitates the issuance of 1099 forms, which report income other than wages, salaries, and tips.
If you’ve made the determination that the person you’re paying is an independent contractor, the first step is to have the contractor complete Form W-9, Request for Taxpayer Identification Number and Certification. This form can be used to request the correct name and taxpayer identification number, or TIN, of the payee. The W-9 should be kept in your files for four years for future reference in case of any questions from the worker or the IRS. The W-9 form should be reviewed and amended every tax year or whenever any of the information provided on the form changes (your name, business name, address, or EIN). Your client will use the information presented by you, the independent contractor, to provide your 1099-MISC form. As you’ll later need to use the information provided on the 1099 detailing the amount paid to you to file your tax return, it is your responsibility to keep this information up to date to ensure quick and efficient tax filing.
Who is exempt from providing a W-9?
Form 945, Annual Return of Withheld Federal Income Tax, must be filed if the payer is required to deduct backup withholding. For more information on Form 945, see Topic no. 307, Backup withholding and Publication 15, (Circular E), Employer’s Tax Guide. Details about filing Form 1099-NEC, the reportable payment threshold amount, and for information about required electronic filing, are available in the Instructions for Forms 1099-MISC and 1099-NEC PDF (PDF). Generally, don’t use Form 1099-NEC to report wages and other compensation you paid to employees; report these on Form W-2. Another purpose of Form W-9 is to help the payee avoid backup withholding. The payer must collect withholding taxes on certain reportable payments for the IRS.
- Completing a Form W-9 is required whether you are subject to withholding or not.
- If you’re suspicious about a W-9 that someone has sent you, ask them which tax forms they plan on sending you back after you fill it out.
- Some accountants will even suggest collecting a W-9 before issuing any payments at all to encourage people to file up-front.
Backup withholding and nonresident alien withholding
A W-9 Form, also called a Request for Taxpayer Information Number and Certification, is a tax document by the U.S. A W-9 form is typically used by businesses and individuals who need to request a Taxpayer Identification Number (TIN) from another party for tax purposes. For payees exempt from backup withholding, see Payees Exempt From Backup Withholding.
How to fill out a W9 form.
TIN and that the transferor is not a foreign person, then no withholding is required for a disposition. If you don’t collect backup withholding from affected payees as required, you may become liable for any uncollected amount. Because Form W-9 doesn’t have to be filed with the IRS, you can print out this form directly from the IRS and have the payee complete the printed form.
Though a lot of the information these forms collect is similar, they represent different types of business relationships. Notably, Form W-4 requests information used to calculate tax withholding. The main difference between Form W-9 and Form W-4 is that Form W-9 is for independent contractors and other people who are not employees, while Form W-4 is for more traditional employment relationships. Remember that the IRS gets a copy of any 1099s, too, so be sure to accurately report any payments you received during the year when filling out your tax return.
For instance, if the payee fails to provide a correct TIN or fails to certify the TIN. As your business expands beyond borders and boundaries, chances are you’ve explored hiring independent contractors. While full-time employees fill out a Form I-9, independent contractors, known as 1099 workers in the U.S., need to fill out a form W-9. Don’t report on Form 945 withholding that is required to be reported electronically on Form 1042, Annual Withholding Tax Return for U.S. Use Form 1042 to report tax withheld under chapter 3 on certain income of foreign persons, including nonresident aliens, foreign partnerships, foreign corporations, foreign estates, and foreign trusts. Also use Form 1042 to report tax withheld under chapter 4 on withholdable payments.
It’s a way of formally gathering personal information, having a standard method of transmitting information, and requiring the furnisher to certify that the information they are providing is correct. Form W-9 is then used to issue specific tax statements to non-employees that earned certain types of payment throughout the year. Now, if you read the fine print in the W-9 instructions carefully, it seems to indicate that most people aren’t required to sign this form at all. You’re generally only required to sign it if the IRS has notified you that you previously provided an incorrect TIN. Technicalities aside, however, the person who asked you to fill out Form W-9 will probably consider it incomplete or invalid if you haven’t signed it.
The Difference between a Contractor and an Employee
In 2025, you may still need to use the 2023 W-9 form to handle overdue payments or complete late tax filings for 2023. Knowing when to use the older version helps maintain compliance and ensures proper recordkeeping. If your small business is collecting W-9s, you should make sure to send them well before the 1099 deadline.
Instead, your company should keep it on file and use it to fill out any informational tax forms, such as 1099 Forms (also known as Form 1099-NEC). The IRS will send you a notice if the payee’s name and TIN on the information return you filed don’t match the IRS’s records. (See Taxpayer Identification Number (TIN) Matching next.) If you receive a backup withholding notice, you may have to send a “B” notice to the payee to solicit another TIN.
