As the saying goes, nothing is certain except death and taxes. Still, facing tax preparation season each year never gets any easier—after all, most people don’t open businesses because of a passion for filing out tax forms (unless, of course, you start an accounting business).
Just how much of a hassle tax season is, however, is up to you. Businesses that organize required tax information up front (and even hire a tax professional to assist with filing) can get through tax preparation season with minimal disruption from business operations. Those that fail to proactively collect information, on the other hand, are in for a rollercoaster of combing through emails and documents in a frantic attempt to locate required information before filing deadlines.
The W9 form is one of a business owner’s most powerful tools for obtaining and storing accurate tax information. Check out our guide to the W9 form and make your next filing season manageable—and even, dare say, a breeze.
What is a W9 form?
A W9 Request for Taxpayer Identification Number and Certification is an Internal Revenue Service (IRS) form that businesses use to obtain correct information from nonemployees (such as independent contractors) to whom they pay more than $600 in a given tax year. The W9 is a required form that must be filled out to receive a 1099.
What is the purpose of a W9 form?
W9 forms provide businesses with the tax information they need to complete and file Form 1099—a type of information return that independent contractors use to file tax returns and the IRS uses to track nonemployee compensation and prevent underreporting.
If your business has employees, you are legally required to withhold income taxes to cover Social Security and Medicare taxes. Independent contractors, on the other hand, file their own income tax returns and do not typically have taxes withheld. For this reason, businesses must file 1099s for all freelancers, consultants, and independent contractors to whom they pay more than $600 in a tax year.
W9 form best practices include requiring independent contractors, for example, to provide a completed form before beginning work with your company. This ensures that a contractor is legally authorized to perform services and makes sure your business has all of the information it needs for tax purposes.
Who needs to complete a W9 form?
Any independent contractor performing services that will total more than $600 in a calendar year must fill out a W9 form. Individuals who receive miscellaneous income such as royalties, rent payments, or prizes and awards totaling more than $600 annually, must also complete a W9.
W9s are not submitted to the IRS; instead, they are held by the requesting company and used for tax preparation purposes. W9 forms are required in the following situations:
- A business hires an independent contractor who will earn more than $600 in a given tax year.
- A financial institution manages a taxpayer’s investment holdings.
- A taxpayer takes part in a real estate transaction, such as the sale of a home or other property.
- A lender forgives a portion of debt, including credit card debt or mortgage interest debt.
How to fill out a W9 form
W9s collect contact and identifying tax information from the payee. The form includes the following fields:
- Name. Line one requires the full legal name of the taxpayer.
- Business name. Line two is for a business name. This line is only required if you, the payee, are completing services as a business and have either established a business entity or a DBA, which stands for “doing business as.” If you haven’t formed a business entity or set up a DBA, leave this line blank.
- Federal tax classification. Line three indicates the individual or business type. This section has five options: individual/sole proprietor or a single-member LLC; corporation (C corp or S corp); limited liability company (partnership, C corp, or S corp); partnership; or trust/estate.
- Exemptions. Individuals can skip this section. If you are completing the form as a business and your business is exempt from withholding, however, provide the tax code that indicates the reason for the exemptions.
- Address. All taxpayers must provide their full home or business addresses. The requesting businesses will use this information to send 1099s to the proper place. Include your full address, city, state, and ZIP code.
- Account numbers. If you are providing a W9 to a financial institution, your bank may request the account numbers representing your holdings at that institution.
- Tax identification number. Your taxpayer identification number (TIN) will either be an employer identification number (EIN) if you perform work as a business, or your Social Security number (SSN) if you perform work as an individual or sole proprietor.
W9 form FAQ
What is a W9 form used for?
Businesses and financial institutions use W9s to gather the correct information (such as name, address, and correct Taxpayer Identification number) that they need to properly file 1099s for independent contractors and investors.
Who needs to fill out a W9?
People who earn more than $600 in a calendar year from a business, such as contractors, must fill out a W9.
Where do I get W9 form?
W9 forms are provided for free by the Internal Revenue Service. To make sure that you receive an up-to-date form, get yours directly from IRS.gov.
Is W9 the same as 1099?
Form W9 is not the same as form 1099. Businesses use W9s to collect the information they need to properly file 1099s. Neither 1099s nor W9s are submitted to the IRS. Instead, they are provided to requesting businesses so they have the correct information about taxpayers. The taxpayer, or payee, needs a 1099 to properly file their income tax returns.
When are W9 forms due?
W9 forms are not submitted to the IRS, so there is no official due date for obtaining a completed form. Because W9s are used for tax preparation, however, best practices involve obtaining a W9 from any individual to whom your business will send a 1099 before the start of the work engagement. This ensures that you have all of the information you need for tax purposes before the start of tax season.