What Is a W-9 Form?
A W-9 form is an Internal Revenue Service (IRS) tax form which is used to confirm a person’s name, address, and taxpayer identification number (TIN) for employment or other income-generating purposes. The confirmation can be requested for either an individual defined as a U.S. citizen or a person defined as a resident alien.
A W-9 form is also known as a Request for Taxpayer Identification Number and Certification form.
The Basics of a W-9 Form
A W-9 form is a formal written request for information only, and is used solely for the purpose of confirming a person’s taxpayer identification number (TIN). An entity that is required to file an informational document with the IRS such as Form 1099, must obtain your correct TIN to report any earnings or losses that may affect your federal tax return or your taxable income. For most individuals, the TIN will be their social security number (SSN).
The W-9 differs from a W-4 Form - which is more commonly supplied by employees to direct employers - in that the W-9 does not inherently arrange for the withholding of any taxes due. Any required taxes based on gains related to the provided W-9 are the responsibility of the TIN holder listed on the document, unless the taxpayer is subject to backup withholding. If backup withholding is required, this will need to be noted on the W-9, to properly inform the entity receiving the information of the need to withhold accordingly.
- The W-9 is an official form furnished by the IRS for employers or other entities to verify the name, address, and tax identification number of an individual receiving income.
- The information taken from a W-9 form is often used to generate a 1099 tax form, which is required for income tax filing purposes.
- The information collected by an entity on a W-9 form cannot be disclosed for any other purpose, under strict privacy regulations.
Use of W-9 Information
The information obtained on a W-9 form is most often used to create a version of the Form 1099. A Form 1099 contains information about any income that may have been received by the TIN holder that would not normally be listed on a W-2. This includes, but is not limited to, income paid to a person as part of a contract; certain real estate transactions; mortgage interest paid by an individual; dividends paid against an investment; and various other financial transactions.
A Form 1099 is only required to be issued once the minimum income threshold is reached, which is set at $600 as of 2018. Amounts under this threshold must be reported as income by the TIN holder, but does not require a 1099 form.
Even though employees are legally required to supply certain personal information to their employers, an employee's privacy is protected by law. An employer who discloses an employee's personal information in any unauthorized way may be subjected to civil and criminal prosecution.
Form W-9 is one of the most straightforward IRS forms to complete, but if tax forms make you nervous, don’t worry. We’ll walk you through the proper way to complete it.
Step 1: Enter your name as shown on your tax return. Easy, right?
Step 2: Enter your business name or "disregarded entity" name, if different from the name you entered for step 1. For example, you might be a sole proprietorship, but for marketing purposes, you don’t use your personal name as your business name; instead, you are “doing business as” some other name. You would enter that name here. As for the disregarded entity part, if you don’t know what it is, you probably aren’t one. The most common disregarded entity type is a single-member limited liability company. Sole proprietorships and S corporations are never classified as disregarded entities.
Step 3: What type of business entity are you for federal tax classification: sole proprietorship, partnership, C corporation, S corporation, trust/estate, limited liability company or “other”? Check the appropriate box. If you’re not sure, you’re probably a sole proprietorship, because you would have had to file a lot of paperwork to become one of the other entities.
Step 4: Exemptions. Chances are you’re going to leave these boxes blank. Here are a couple of exceptions:
- Payees that are exempt from backup withholding, such as corporations (in most cases), might need to enter a code in the “Exempt payee code” box. The Form W-9 instructions list the exempt payees and their codes and the types of payments for which these codes should be used. Corporations filling out a W-9 for receipt of interest or dividend payments, for example, would enter code “5.”
- Payees that are exempt from reporting under the Foreign Account Tax Compliance Act (FATCA) might need to enter a code in the “Exemption from FATCA reporting code” box. Neither of these boxes will apply to the typical independent contractor or freelancer.
Step 5: Provide your street address, city, state and zip code. What if your home address is different from your business address? Which address should you provide on form W-9? Use the address that you will use on your tax return. For example, if you’re a sole proprietor who rents office space, but you file your tax return using your home address, enter your home address on form W-9 so the IRS won’t have trouble matching your 1099s with your 1040 form.
Step 6: In this optional step, you can provide the requester’s name and address. You might want to fill out this box to keep a record of to whom you provided your tax identification number.
Step 7: The IRS calls this section Part I, which has to make you wonder what all those steps you just completed were. Here, you must provide your business’s tax identification number, which will either be your individual Social Security number (SSN) if you’re a sole proprietorship, or your employer identification number (EIN) if you’re another type of business. Now, some sole proprietorships also have EINs, but the IRS prefers that sole proprietors use their SSNs on form W-9. Again, doing so will make it easier to match any 1099s you receive with your tax return, which you will file under your SSN.
What if your business is new and doesn’t have an EIN? You can still fill out form W-9. The IRS says you should apply for your number and write “applied for” in the space for the TIN. You’ll want to get this number as quickly as possible because, until you do, you’ll be subject to backup withholding. You can apply for an EIN at the IRS website. See the instructions below for Step 8, Part II, for more on backup withholding.
Step 8: In Part II, you must attest to the truthfulness of all of your information before you can sign form W-9. Intentionally lying on a tax form could mean you’ll have to pay a fine or go to jail; the IRS doesn’t mess around. Before signing form W-9, here are the statements you must certify are true, under penalty of perjury:
1. The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me).
- If you were thinking about using a “borrowed,” stolen or made-up tax ID number, think twice before lying under oath.
2. I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding.
- Most taxpayers are exempt from backup withholding. If you have no idea what the IRS is talking about here, you’re probably exempt. If you aren’t exempt, the IRS will have notified you, and the company paying you needs to know because it is required to withhold income tax from your pay at a flat rate of 28% and send it to the IRS. Incidentally, now you know another good reason not to cheat on your tax return: You might have to tell a future client about it, and that might make the company think twice about you. Item (c) basically says that if you were once subject to backup withholding but aren’t anymore, no one needs to know.
3. I am a U.S. citizen or other U.S. person.
- If you’re a resident alien, you’re in the clear. The IRS also considers the following to be a “U.S. person”: a partnership, corporation, company or association created or organized in the United States or under the laws of the United States; a domestic estate; and a domestic trust. If your business is a partnership that has a foreign partner, special rules apply; read about them in the instructions to form W-9. If you aren’t a U.S. citizen, you may need to fill out form W-8 or form 8233 instead.
4. The FATCA code(s) entered on this form (if any) indicating that I am exempt from FATCA reporting is correct.
- You probably won’t need to worry about this one, which has to do with the Foreign Account Tax Compliance Act.
A Few More Points Before You Sign
Form W-9 tells you to cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return.
You may cross out item 2 if you’re filling out form W-9 in connection with a real estate transaction. Item 2 doesn’t apply in this case, so it doesn’t matter if you’re subject to backup withholding.
Now, if you read the fine print in the W-9 instructions carefully, it seems to indicate that most people aren’t required to sign this form at all. You’re generally only required to sign it if the IRS has notified you that you previously provided an incorrect TIN. Technicalities aside, however, the person who asked you to fill out form W-9 will probably consider it incomplete or invalid if you haven’t signed it, and good luck trying to convince them otherwise.
Returning the Form
Return your completed form W-9 to the business that asked you to fill it out. Ideally, you’ll deliver it in person to limit your exposure to identity theft, but this method often isn’t practical. Mail is considered relatively secure. If you must email the form, you should encrypt both the document and your email message and triple check that you have the recipient’s correct email address before sending your message. Free services are available online to help you do this, but check their reputations before trusting your documents to them.