IRS Form W-9

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IRS Form W-9

The choice to remain autonomous and maintain a flexible business schedule brings about much freedom and many restrictions simultaneously. Getting all the joys of self-employment works alongside duties on detailing relevant tax data and arranging documentation that may be needed when a freelancer regularly submits tax charges and tax revenue per annum.

Whether you are a freelancer, a self-employed specialist, or an independent entrepreneur, the W-9 form will be of great assistance to keep your tax reports in order. Also, this document is indispensable for the business to revise the information regarding their potential independent contractors.

What is the “Request for Taxpayer ID and Certification” or W-9 Form?

Form W-9 is an inherent document that collects personal data, including the individual’s legal name, address, Social Security Number (SSN), and other relevant information to submit to tax-related services. In the United States, the document is recognized as the Request for Taxpayers Identification Number and Certification. The form is tailored by the Internal Revenue Service (IRS) and can be obtained at the official website. To reduce effort and fill out the PDF file, we encourage you to try our advanced editing software.

The form is utilized as a fundamental basis for creating the IRS form 1099-MISC needed for nonemployees (the business or the employer completes form 1099 MISC). Form W-9 demands annual renewal and adjustments. One shouldn’t serve this paperwork to the IRS as it is just an instrument of gathering an independent contractor’s personal data. Note that Form W-9 only reflects business relations between the contractor and the employer and not the amount of the contractor’s yearly earnings.

How Can Form W-9 Be Useful?

The primary purpose of the W-9 Form is to provide the contractor’s consent to serve their income tax, Social Security, and Health Care Services. The document is offered to every US-invited employee who should complete and return the form to the entity, business employer, or the entity’s HR division. It is advisable that the latter keep the document for a few years if the respected information is requested by the IRS or any other related institution.

The business uses the data introduced in Form W-9 to fill out Form 1099, filed to the IRS. The Internal Revenue Service collects this paperwork to understand the independent vendor’s (the freelancer’s) annual earnings and calculate the income tax.

Once the contractor (freelancer) appends their signature, they approve all data submitted and cannot be subject to backup withholding.

How Does Backup Withholding Work?

Backup Withholding is the procedure run by the IRS to state it obtains taxes on income from the entity’s invited workers. Individuals become subjects to backup withholding when they neglect to submit or certify their taxpayer identification number or fail to report any income and dividends. As a rule, backup withholding makes 24% of the individuals’ income, reserved by the company and directed to the IRS office. To avoid these measures, individuals, being self-employed, should fill out the W-9 certificate to confirm they are not subject to backup withholding.

There are certain cases when one is exempt from backup withholding. Unlike other commercial transactions, including rent, royalties, and other interest payments, real estate transactions executed in the US cannot be subject to backup withholding.

Who Should Use Form W-9?

Whenever a person gets income that surpasses 600 USD annually from a client, they should report their earnings to the IRS regardless of their independent and self-employed status. It is a significant misconception to consider that freelancers do not pay taxes at all. In fact, the forms that an independent contractor renders can be more complicated than those a full-time employee fills out. Therefore, the IRS Form W-9 is essential for:

Autonomous proprietors and freelancers

Ensure to revise the status of your employment. Freelancers should complete Form W-9, while full-time workers use form W-4. Should your earnings be 600 USD and higher, complete the W-9 provided by the client to whom you deliver your services. The employer will use that data to file a 1099 Form to IRS. If your yearly income from this client is under 600 USD, you are exempt from filling out this form.

Entities hiring freelancers

If your contractor’s earnings exceed 600 USD, you need to provide this data to the IRS with the 1099 form. To complete the document, you require reliable information from the Form W-9.

Financial organizations and their clients

A financial organization might need the W-9 form to repay the person’s income from dividends and interest.

Can I Get by without Form W-9?

Being self-employed or a freelancer, an individual has to be sure they know their responsibilities and privileges. Make sure you are familiarized with relevant requirements and understand when the IRS W-9 Form is correct to be used. Clarify the purposes of filling out the W-9 Form if you are prompted to do so by a business entity or the employer.

Sometimes, completing the document is unnecessary, as the business (for example, a financial institution) does not require such information. As a rule, banks have inherent details of one’s taxpayer identification number (TIN) at their disposal. Ensure its dependability not to fall into a double-dealer’s hands. Make all possible efforts to guard your social security number, tax identification number, and other ID data from identity theft, scammers, and fraud.

Another legal reason not to fill out the W-9 form is being a foreign person. In this case, the individual should complete the Withholding of Tax on Nonresident Aliens and Foreign Entities form. Suppose a person becomes a residential alien (for example, a student participating in the scholarship program within the US). They have to provide certain attachments to the IRS W-9 Form to be exempt from the US tax charges on a particular income.

What Data Does the W-9 Cover?

Form W-9 is usually used as a PDF containing the petition itself, the instructions, and the essential data regarding the procedure of submitting the document. Below is a list of relevant sections:

  • Legal and business names and domiciliary data
  • Type of tax class
  • Exemptions section (only for partnerships)
  • Taxpayer ID number section, including Social Security Number and Employer Identification Number
  • Certification Guidance
  • Authorization

The W-9 paperwork also provides general and specific instructions and a list of related documents.

Laws and Conditions

The Internal Revenue Service regulates the procedure and the W-9 revisions. The advanced information is offered on the IRS official website and contains relevant updates and guidance. Here are some regulations to know:

  • Under Public Law 115-97, the backup withholding rate was reduced from 28 to 24%.
  • Section 3606 of the Internal Revenue Code states that the business should withhold 24% of assessable income if the invited specialist (payee) does not provide a correct taxpayer ID number.
  • Following Section 6109 of the respected Internal Revenue Code, the payee should submit their accurate taxpayer identification number.

Other IRS Forms for Individuals

Learn more about other IRS forms that you might need for employment or other income-generating purposes.

Filling Out a W-9 Form

W-9 contains an acknowledgment that specialists share valid tax ID and their tax class, whether they are exempt from backup withholding or should take tax return responsibility.

W-9 can be challenging to fill out because not all sections may fit your particular case. We suggest you try out our software to generate a PDF and fill out the required information instantly. Follow this comprehensive guide to understand better how to fill out form W-9.

1. Indicate the Taxpayer’s Identity Details

The individual should provide the full legal name the same way it is spelled on their income tax return. It is compulsory to fill out this section whether you are an independent contractor or running a proprietorship.

step 1 indicate the taxpayer’s identity details filling out an irs w 9 form

2. Indicate the Taxpayer’s Business Title

This section is optional if your legal name (spelled in section one) is the same as the business name. However, should the spelling or the concept differ, define it in the suitable section. Suppose your name is Anna Baker. You should fill this information in the first section. Your business name is Anna Baker — leave the field blank. However, if your business name is, for example, Anna Baker and Friends Inc. — it is mandatory to fill out this section.

step 2 indicate the taxpayer’s business title filling out an irs w 9 form

3. Specify the Tax Status

Follow the guidance of section three and submit your status regarding IRS classification. Select one option and check the appropriate field.

Single-member LLCs should select the first box. “Limited Liability Company” slot is appropriate for corporation and partnership statuses.

step 3 specify the tax status filling out an irs w 9 form

4. Complete the Exemptions Section

The Exemptions section is applied only to some types of entities. Being a sole proprietorship or an independent contractor, please, leave these areas blank. This field offers two choices. If you are exempt from backup withholding, enter a valid code in the first box. If you have a legal benefit not to proclaim the Foreign Account Tax Compliance Act, mark the second box.

step 4 complete the exemptions section filling out an irs w 9 form

5. Define Your Home Address

The petitioner should provide their physical address, including the street and apartment number. This information is needed to serve notifications and important mail delivery from the employer.

step 5 define your home address filling out an irs w 9 form

6. Write Down the Domiciliary Data

Enter the information regarding the city, your state of residence, and your ZIP code.

step 6 write down the domiciliary data filling out an irs w 9 form

7. Specify the Requester’s Address

There is a slot requiring the requester’s (employer’s) address and legal name opposite the taxpayer’s residency information. The section is optional and can be left blank.

step 7 specify the requester’s address filling out an irs w 9 form

8. Enter Extra Account

If applicable, provide any extra account number at the employer’s request. If you don’t have any, skip this optional section.

step 8 enter extra account filling out an irs w 9 form

The second and third segments are as follows:

“Part One” — Defining the TIN

The section is dedicated to the taxpayer ID and provides two options: for individuals, single-member LLC versus entities and business corporations.

  • Individuals should enter their Social Security Number.
  • Corporations and partnerships need to select and enter the Employer Identification Number.
  • A sole proprietor can opt for any option provided in this section.

step 9 part one defining the tin filling out an irs w 9 form

“Part Two” — Certification

This part authenticates all the aforementioned information and proves your consent to the data submitted. Therefore, you should review the document again with scrutiny and append your signature if everything is correct. Note that you completely agree with every statement provided in the Certification Part.

Suppression of evidence and malicious falsehood can lead to prosecution and penalties, including fines and imprisonment. Form W-9 allows you to cross out the second statement if you are subject to backup withholding and have been notified about this fact.

Complete the W-9 IRS Form by placing the current calendar date and report the document to the requester. Remember that you don’t need to serve this paperwork to the IRS office.

step 10 part two certification filling out an irs w 9 form

Penalty Regulations

Independent contractors and employers consent to respect each other and the IRS institution and provide correct and veritable information by filling out the form. There are several things to avoid; otherwise, the petitioner or the requester will be subject to penalties.

  • Disclosure of TIN

If the employer or business exceeds their authority and uses your tax ID number, breaching the laws, they can be prosecuted for criminal and civil offenses.

  • Wrong TIN

If the independent contractor fails to provide a relevant federal tax ID number, they will have to pay a penalty fine of 50 US Dollars. Unless the individual acts without fraudulent intent, they will not be subject to penalties.

  • Falsification of Data Causing Civil Fines

Should contractors intentionally submit false data that affect backup withholding, they will be charged a 500 USD penalty fine.

  • Falsification Causing Criminal Punishment

Fraudulent intent to falsify the data may lead to a criminal offense punishment, including fines or arrest.

Frequently Asked Questions

Do W-9 and W-4 forms cover similar data?

Both needed when a client hires service providers. W-9 is essential for a part-time specialist invited for a short period. Freelancers, independent contractors, single-member LLC, whose yearly income from the business is over 600 USD  require completing the W-9 form. Full-time employed service providers and workers should fill out the W-4 form.

Are there charges claimed for the W-9 statement?

W-9 statement collects data about a taxpayer and doesn’t appear to be a payment report. There is no need to make this application to the IRS office. After executing the record, distribute it to the company or client. When you deal with W-9, you should collect reports to accommodate an Income Tax and SE Tax.

Is It Possible to Submit the W-9 Form Electronically?

Yes, it is. A requester, that is, a person who requires a payee or payee’s agent to fill in the W-9 form may organize a system to submit the document electronically. This system must ensure that the person submitting the form is the one who is identified on it and provide the same information as the hard copy of the W-9. A payee, that is, the person who submits a taxpayer identification number should be ready to sign the form electronically to verify the identity, as well as to provide a paper Form W-9 if necessary. It’s also possible to use your variant of an electronic system for the W-9 submission as long as you provide the correct information and e-signature.