What is a W-9 tax form?
Form W-9 is a tax-related document that employees fill out as part of their onboarding process providing the employer with important information such as the employee’s name, business entity, Social Security number, taxpayer identification number, and address.
It’s the form you’ll need to fill out if you work in the United States as an independent contractor hired on a contractual basis for a company. For example, this encompasses many kinds of self-employed workers and freelancers.
As an employer, you should use form W-9 to keep records for each relevant contractor. You won’t need to send these forms to the Internal Revenue Service (IRS), but you will need them to complete an employee’s form W-2 or 1099-MISC form each year.
What is a W-9 tax form used for?
Independent contractors, employees, and companies must ensure that W-9 tax forms are completed, filed, and updated. The tax requirements vary for different types of people, so you’ll need to check that you are a worker that requires the use of a W-9. Generally, if you’re an independent contractor, freelancer or sole proprietor, you will need to execute an IRS W-9 form.
Who needs to complete a W-9 form?
As an independent contractor, you’re required to pay taxes on the income you earn and you must file a tax return with the IRS each year. Your employer will not retain money for taxes, in the same way, they would for permanent employees, so you’re responsible for doing the accounting yourself.
To do that, you’ll need a 1099 form from each company that you’ve completed contract work. To ensure that you receive your 1099s in time for tax season, you’ll need to submit a completed W-9 tax form to each company prior to working on projects for them. This guarantees that they have all of the information they need to file their taxes with the IRS, and to generate and send your 1099 for your personal income tax return.
Form W-9 will need information such as the contractor’s full name, the business’ name, what kind of business it is, and the tax identification number/Social Security number (depending on whether the contractor is a business or a sole proprietor).
You will also need to include information about your ‘backup withholding’ status. It’s unlikely you’ll be subject to backup withholding, however, if you are the contractee then you will need to withhold tax from your pay. This is typically a fixed rate of 24% for the 2018 to 2025 tax years.
If you manage payroll or taxes for a company, it’s important that you keep a completed W-9 on file for each active working employee and contractor. You’ll use W-9 tax forms to set up payroll for employees and to create W-2s and 1099 forms for every employee and contractor during the federal tax season every year.
Tips and Instructions for use
You may be sent a W-9 by your employer, otherwise, you can easily access an up to date copy via the IRS website (irs.gov).
IRS form W-9 is a four-page document, but all fillable fields are on the first page. In the top section, the employee or contractor should write or type their personal information, including their name, business name (if applicable), address, and tax classification:
- C Corporation,
- S Corporation,
- Limited Liability Company (LLC),
- trust/estate, or other.
In the second section, the individual filling out the W-9 tax form must add their Social Security or employer identification number (EIN).
The W-9 needs a signature and date in the final section. Once the form is complete, send it back to the person or company who requested it, at which point it needs to be completed entirely.
You’ll need a new W-9 form if any of your relevant information has changed since your last form was submitted. This could include information like your Social Security number, tax identification number, name, business name, address, or anything else on the form.
Make sure that you definitely need to fill out a W-9, not any other kind of tax document. For example, permanent and full-time employees generally need form W-4, not a W-9. This is used to help employers determine the amount of money to withhold for the taxman, and is not suited for freelancers.
If you’re a freelancer, it can be difficult to procure a 1099-MISC form from everyone you work for in a given year. The IRS recognizes this, and as a result, does not require companies to send you a 1099 if they paid you less than $600 in a single year. Meaning you won’t have to send a W-9 tax form to companies for those small projects you completed.
It’s also very important to treat the completed form as a sensitive document, as it contains information about yourself (and possibly the hiring company) that could be used fraudulently (such as your tax identification or Social Security number). Always protect the information and take general privacy precautions. Do not leave it unattended or save it on a public computer, and always send the completed form in a secure manner.
For the same reasons, confirm you know the business or person that’s requesting a W-9 from you. If you’re not sure who they are, or why they are asking you for one, you should find out if there is a legitimate reason before handing over any personal, potentially sensitive information.