What Is Form W-9?
A W-9 form is an Internal Revenue Service (IRS) tax form that 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 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.
- Independent contractors who work with for companies they are not employed with must often provide that company a W-9.
- If you do not furnish a W-9 as requested, your client must withhold taxes from your earnings at a tax rate of 24%.
Who Can File Form W-9?
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 employer or other 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.
What Is Form W-9 Used for?
The information obtained on a W-9 form is most often used to create a version of Form 1099. A 1099 form contains information about any income that may have been received by the TIN holder that would not normally be listed on a W-2.
However, a W-2 is only issued to employees of a company, not independent contractors or unrelated vendors. This includes but is not limited to income paid to a person as part of a contract, certain real estate transactions, dividends paid against an investment, and various other financial transactions.
Form 1099 is only required to be issued once the minimum income threshold is reached, which for most miscellaneous income is set at $600 for tax years 2021 and 2022. Amounts under this threshold must be reported as income by the TIN holder but do 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.
How to Fill Out Form W-9
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.
All pages of Form W-9 are available on the IRS website. In addition, the form may include a specific set of instructions provided by the IRS.
Step 1: W-9, Line 1
Enter your name as shown on your tax return.
Step 2: W-9, Line 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.
Step 3: W-9, Line 3
Select which 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, and only one classification should be selected.
If you're not sure what type of business entity you should select, the IRS has provided a summary table for guidance as part of the Form W-9's instructions.
Step 4: W-9, Line 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: W-9, Lines 5-6
Provide your street address, city, state, and zip code. 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 Form 1040.
In addition, the W-9 may be a company's primary means of obtaining your personal information. As this information may get logged into their accounting system when you get set up as a supplier in their records, this address may be used to furnish your 1099 or mail you other important tax documents.
Step 6: W-9, Line 7
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.
In addition, you have the option to list relevant account numbers at the end of this top section of the Form W-9. This account number section may be used to uniquely identify someone based on a number within the client's system. For example, someone may request you to fill out a Form W-9. As you happen to be supplier #45 in their records, they may ask you to make note of your supplier number on this line.
Step 7: W-9, Part I
The IRS calls the next section Part I. Here, you must provide your business's tax identification number, which will either be your individual Social Security Number 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 a W-9 form. 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: W-9, Part II
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).
- Taxpayers must use legit tax ID numbers. Using a "borrowed," stolen, or made-up tax ID number would equate to lying under oath, and involve serious consequences.
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 24% (as of 2020) 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.
Who Must Complete a W-9 Form
A Form W-9 must be completed by one party and furnished to a second party if the second party is going to furnish specific types of payments in the future. Most broadly, Form W-9 must be filled out by independent contractors that perform work for another party in which they are not employed with. This includes freelance workers or gig employees under non-employment structures.
A W-9 is also required from people in specific circumstances. A bank or lending institution may ask for a W-9 as part of the process of setting up a new account, as interest and dividend payments are furnished through Form 1099-INT. Participants in a contest that may win prizes may also be required to fill out a W-9, as the prize value may be taxable income and require IRS reporting.
Form 1099 is also used to furnish mortgage interest payments, student loan payments, real estate transaction proceeds, and discharge of certain types of debt. For these forms, the opposing party may request Form W-9 to ensure they have appropriate information on file.
Completing a Form W-9 is required whether you are subject to withholding or not. If you are exempt, this form is your means of communicating that exception to the paying party.
Special Considerations When Filing Form W-9
Signing Form W-9
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.
Returning Form W-9
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. Typically the business that needs to submit a W-9 to the IRS will give you one to fill out.
Failure to Remit Form W-9
If someone asks for a completed Form W-9, it's usually for a good cause. Be skeptical for requests where you're not sure why your information is needed or who is making the request. It is expected that requests as part of normal business operating activities will be fulfilled.
There are some repercussions if you do not remit Form W-9. First, the payor is required to begin withholding taxes from future payments. As of 2022, the current withholding rate is 24%. In addition, there are the following penalties for non-compliance:
- $50 penalty for every failure to furnish a correct TIN to a requestor unless you are able to provide errors that were not willful neglect.
- $500 penalty if you make a false statement with no reasonable basis that results in no backup withholding.
- Other fines and/or imprisonment for willfully falsifying certifications or affirmations.
- Civil and/or criminal penalties for disclosing or misusing another party's W-9 information in violation of Federal law.
What Is Form W-9 Used for?
Form W-9 is used to furnish tax information from one party to another. It's a way of formally gathering personal information, having a standard method of transmitting information, and requiring the furnisher to certify that the information they are providing is correct. Form W-9 is then used to issue specific tax statements to non-employees that earned certain types of payment throughout the year.
Who Needs to Fill Out a W-9?
Broadly speaking, anyone who will receive compensation as a non-employee is required to fill out a W-9. There are many situations that may arise when Form W-9 is required. For example, a taxpayer who is set to collect interest, receive proceeds from a real estate transaction, pay home mortgage interest, pay student loan interest, or have debt canceled are also required to receive specific types of Form 1099. In order to accurately furnish the tax form, an opposing party may request your tax information via Form W-9.
Is a W-9 Used for Self-Employed Individuals?
Yes, a W-9 is most often used for individuals who are self-employed. If a worker is an independent contractor, freelancer, or self-employed, Form W-9 must be provided to those whom you have earned over $600 from without having been hired as an official employee.
What Happens If I Do Not Provide a Form W-9?
Should you choose not to furnish a Form W-9 or if the information provided is incorrect, a 24% withholding tax will be taken from future payments you receive from your client. In addition, there are penalties and fees for intentionally failing to furnish correct information or misuse of TINs.