Form W-9 – Important Things to Know

IRS Form W-9 is used to provide worker information to the person who is required to file a report with the IRS for various reasons.

The purpose of Form W-9

Form W-9, Request for Taxpayer Identification Number and Certification, is a tax document that provides tax information from one party to another.

Image of Form W 9
Image of Form W-9

Uses for Form W-9

Employers, or payers, must obtain the correct tax information from all workers. It’s used to collect tax information from independent contractors, or payees.

It’s solely used as an information collection form and is not filed with the IRS. The payer will use the information provided to complete tax filings at the end of the year.

Completing Form W-9

The IRS website provides a blank W-9 PDF form that can be filled out and printed. It’s a fairly straightforward form to complete. It includes the following boxes for collecting information:

  • Box 1 – Name
    • This should be completed with the same name on the payee’s tax return.
  • Box 2 – Business name (if different from box 1)
    • This should be completed with a “doing business as” name or other name, if applicable.
  • Box 3 – Federal tax classification indicator
    • The payee should check the appropriate box for their federal tax classification. Only one of the following should be selected:
      • Individual/sole proprietor or single-member LLC
      • C Corporation
      • S Corporation
      • Partnership
      • Trust/estate
      • Limited liability company (other than single member LLC)
  • Box 4 – Exemptions (if any)
    • This should be completed only if there are any applicable exemptions.
  • Box 5 – box 6 – Address
    • This should be completed with the payee’s street address that will be used on their tax return.
  • Box 7 – Account number(s), optional
  • Part I – SSN or EIN
    • This should be completed with the appropriate taxpayer identification number (TIN).
  • Part II – Signature
    • The payee should sign the Form W-9 to attest that everything in the form is correct.

Penalties for Form W-9

In the event that a Form W-9 is requested and not remitted, the payee may be subject to penalties. These include the following:

  • If the payee refuses to provide a Form W-9, then they may be subject to a $50 penalty each time.
  • The payer will begin withholding taxes from payments at a rate of 24%.
  • If the payee provides false information, then they may be subject to criminal penalties, fines, and/or imprisonment.

The difference between forms: W-9 vs W-4

Workers must be classified as either employees or contractors when they are hired. If the worker is classified as an independent contractor, then they should complete a Form W-9 for the payer. If the worker is classified as an employee, then they should complete a Form W-4 upon hire.

Form W-9 is completed before providing a service to the payer. It provides the payer with basic information necessary for year-end reporting.

If the services provided by an independent contractor are less than $600, then a Form W-9 is not required. The employer may quote an independent contractor less than $600, but if, at the end of the service, the amount totals more than $600, a W-9 must be issued. This ensures that the payer can correctly report the nonemployee compensation income amounts.

Form W-4, Employees Withholding Certificate, is a form completed by newly hired employees. Form W-4 includes basic employee information including full name, address, and any tax exemptions. It provides the employer with the information to withhold the correct amount of federal income tax.

Conclusion

Form W-9 is most commonly used for collecting taxpayer information from independent contractors. It’s important that this information is correct, or the payee could be subject to penalties.

BoomTax, The Boom Post, and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors prior to engaging in any transaction.

Leave a comment