W9 is a form filed by third-party companies as independent contractors who provide services to companies, at the request of the respective company. The request for the taxpayer identification number and the certification form is another name assigned to the W9 form. Three main sections can be viewed in the W9 form with the following components.
Name of the taxpayer Name of the company/entity Federal tax clarification (to indicate the type of business) Address and postal code.
Taxpayer identification number (TIN)
TIN is a unique 11-digit numeric code issued for sellers and resellers required to pay VAT (value-added tax).
The taxpayer certifies that the accurate TIN is provided in the form.
W9 is an IRS module; however, this is not sent to the IRS but is managed by the individual who archives the return of information for verification purposes. W9 also acts as an important identification of the taxpayer’s TIN. Companies that obtain services from third parties must request the W9 from an American or foreign citizen. The information contained in this form becomes useful when the company reports to the Internal Revenue Service to indicate the number of funds from third-party companies.
This article covers:
- Who is required to fill out a W-9?
- Why do You have to fill out a tax form?
- What happens if you do not fill the W-9 form?
- How to Fill out a W-9?
- What Is a W-9 Form Used For?
- Why One Should Receive Form W-9?
- Warning Signs for Filling Form W-9
- How to Fill Out a W-9 Form as a Single Member LLC?
Who Is Required to Fill out a W-9?
Whether you are working as a freelancer or an independent contractor, most of your clients should ask you to provide the IRS Form W-9 and a request for taxpayer identification and certification. This form helps companies obtain important information from their suppliers to prepare information for the IRS. Businesses must file information returns with Form 1099-MISC when paying a total of $ 600 or more during the year to a freelancer or independent contractor
Your customers will use the information on your W-9 to enter your name, company name, address, and taxpayer (TIN) number on the Form 1099-MISC they submit about you. They will issue one copy of 1099-MISC to the IRS and another to you after the end of the tax year. Other circumstances for which you may be asked to complete a W-9 include:
- certain real estate transactions
- mortgage interest paid
- acquisition or termination of secured real estate
- debt cancellation
- contributions to an individual pension scheme (IRA)
Why do You have to fill out a tax form?
When registering with your payment system, you must verify your tax status by confirming your name, citizenship, and permanent address. If you are not a US citizen, you are required to obtain this verification information when you post an announcement of a property located in the United States on your site and want to collect your payments in US dollars.
The IRS requires you to collect this information to determine if its earnings are subject to U.S. tax reporting obligations. Our policy is to collect information on the tax status to ensure that we have the data necessary to fulfill all tax reporting obligations and simplify payment procedures. All information provided is securely stored.
After requesting the payment system’s activation, you will receive an email inviting you to fill in the online tax form W-9. This form must be completed for each bank account and signed by the bank account holder to whom payments will be credited. You can access or modify your tax forms by following the steps below:
- Log in to your account
- If it has more than one property, click on the one you want to view
- Click on the Properties icon in the left navigation menu.
- Click on Rules and Policies.
- Click on Payment Options.
- You can see the status of your tax form in the section dedicated to tax forms. Click on the three points to update the form.
What happens if you do not fill the W-9 form?
You may be delayed in receiving payments from the company or may not receive any amount at all. Make sure to submit the W-9 form so that you can work together comfortably.
Since the W-9 form is from the US, it will not be affected by the companies outside the US.
How to Fill out a W-9?
The W-9 form is updated every few years, so make sure your form is up to date.
As of December 2019, the latest W-9 is here on the IRS website.
- Add your name as shown on your tax return.
- Add your business name
- What kind of federal tax category do you: private businesses, partnership companies, company C, companies S, trust/estate, limited liability companies, or “other”? Check the appropriate box.
- Most likely you will leave these boxes blank. Here are some exceptions:
- Payees do not have backup deductions, such as companies (in most cases), may need to enter the code in the “Free paid code” box. The Form W-9 guide lists who are exempt from pay and their codes, and what type of payment these codes should be used for. Corporations fill out a W-9 to receive interest or dividend payments.
- Payers exempt from reporting under the Foreign Account Law Compliance Act (FATCA) may need to enter the code in the “Exempt Report Code” box. FATCA “. Not only will these boxes apply to independent contractors or freelancers.
- Add your contact details like city, state, and zip code. Use the contact details you will use on your tax return.
- Add your Social Security number. This is your taxpayer identification number (TIN).
- Add the date and sign the W-9 form.
What Is a W-9 Form Used For?
W-9 forms are commonly used by independent contractors, rather than full-time employees, to fill out their tax forms and meet their tax obligations. Unlike full-time and part-time workers, independent contractors do not deduct taxes on payments for business services rendered to customers – typically businesses, mid-sized companies, nonprofits, and other business-oriented organizations.
For example, a large financial institution could hire a freelance designer to create a new website for $4,000. When the work is complete, and the designer’s invoice is submitted, the financial institution pays the designer the full $4,000 without paying taxes. Instead, it’s up to the designer to typically pay his taxes of $4,000 quarterly. The sum of this designer’s professional earnings is posted on the W-9 tax form each year and is submitted to the IRS.
The data on a W-9 form comes from the IRS tax form 1099, which lists all the income paid to an individual that would otherwise be recorded on an IRS-W-2 tax form. To correctly complete a 1099 tax form, the customer must provide the payee name, address, social security number, and tax ID. The number before sending it to the IRS.
Why One Should Receive Form W-9?
There are two significant cases of receiving Form W-9. One is from a company that works as a self-employed person. That is because the company provides services and collects payment. The second is to get a Form W-9 from a bank or securities company. Banks and brokerage firms send Form W-9 because of interest or dividends.
When receiving from the company
If you are serving as a self-employed person to the company, suppose you receive more than $600 in a calendar year. The company then creates Form 1099 and sends it a payment statement. The company sends information to the IRS at the same time it sends it to itself.
If the name provided to the IRS does not match the tax ID, the IRS will notify the company to correct the mistake. The company sends Form W-9 to an independent self-employed person for correction.
If you leave this form without answering or are wrong again, you will be subject to withholding tax.
When receiving from a bank or securities company
Investment income earned by American citizens and residents (not non-residents) is not subject to regular tax withholding. However, it does not provide proper information to the payers of interest and dividend income and the IRS.
(The following situations)
- You have not provided your tax ID on Form W-9
- You are giving the wrong tax ID
Ignoring notices from the IRS that you are reporting less than you are on your income tax return
If W-9 is not submitted or accurate information is not provided, the basics will be subject to a 30% withholding tax on foreigners.
Filling out this form is easy. Enter your name, whether you are an individual or a corporation, and your address. In Part 1, enter your social security number (or corporation number). There is no problem so far. Part 2 is a proof section.
1 The information is correct
2 Not subject to withholding tax
3 You are an American citizen or resident
I declare that all three points are correct. If not, you will be fined.
Warning Signs for Filling Form W-9
While submitting Form W-9, you confirm to the IRS that the tax number you provided is correct.
Warning Marks for Alert Form W-9 is a standard tax document. It does not pose many problems alone, but several situations make the red flag fly:
You don’t know the person or business asking you to fill out the W-9. You should always be careful when providing sensitive information such as your name, address, Social Security number, or employer ID number. Make sure you know the person who asked you to fill out the form, why they did this, and how to use the tax information you provided.
Be sure to send the W-9 safely. Do not send your completed W-9 as an unsecured or unencrypted email attachment. Use a secure delivery method, such as hand delivery to email, mail, or encrypted file attachment.
Ask about the types of tax documents the person willing to offer you. If you are unsure why you are asked to complete a W-9, ask what kind of tax documents you would expect to receive when the information is used.
Instead, you were expecting Form W-4. If you start a new business and your new employer allows you to fill in a W-9, ask whether you will work as an independent contractor or an employee to work on your account. Employees complete Form W-4 to adjust their tax withholding. There is no tax on the wages of independent workers – they are responsible for paying the IRS on their own.
How to Fill Out a W-9 Form as a Single Member LLC?
Limited companies are common; however, the income service does not identify the business unit for federal tax purposes. Instead, the owner of the LLC can choose to classify the business as an identifiable business unit. The classification can make a difference in how the IRS assesses corporate capital gains taxes. For freelancers and self-employed people, the classification can be a factor in filling out Form W-9 correctly.
Decide how you want to classify your LLC. Individual LLCs may choose to become a “disqualified entity,” in which case the IRS treats the business as a sole proprietor for federal tax purposes or a corporation.
If you want to be taxed as a company, you can also choose to be taxed as an S company, if you meet certain specific guidelines. You must fill in form 2553 to make an S-company choice. S-companies can offer certain tax benefits.
Complete and file IRS Form 8832 to make a classification choice. Of particular interest is section 6 – select either box “a,” to choose to be taxed as a company or box “c” to want to be taxed as an incomprehensible entity.
Review your company documentation, licenses, and permits. See if you have applied for and received an employer identification number (EIN). Form W-9 asks for an EIN if you have one.
Several companies need an EIN. You especially need an EIN if you have employees running your business as a corporate or file return certificate for employment, excise duty, tobacco or firearms, etc.
You can request an employee identification number (EIN) by filing form SS-4.
Download a blank copy of IRS Form W-9. Fill in your name and company name on the first two lines. Only select the “Limited Liability Company” box below the company name line if you chose to be taxed as a company. Write “C” or “S” on the line next to the limited debt field. “C” denotes a company choice; “S” denotes an S-company election. Fill in your business address on the lines provided.
Write your taxpayer’s ID number on appropriate lines. If you have an EIN, enter your EIN in the boxes provided for Employer Identification Numbers.
Enter the date and sign it. Issue it to the person who requested it. Do not send it to the IRS.