1. What is IRS Form W-9?
2. Independent Contractors vs. Employees
3. Who Needs to Fill Out an IRS Tax Form W-9?
4. Receiving the Form 1099
5. Returning a W-9
6. Requesting a W-9

Do I need to fill out a W 9? Many individuals that work as an independent contractor or freelance professional have this question. Filling out a W-9 provides the company with your social security number so they can report your earnings to the IRS.

What is IRS Form W-9?

The IRS Form W-9 is most often used by those working as an independent contractor or freelance professional. A W-9 is not used for full-time employees. A full-time employee of a company is subject to withheld taxes to pay for benefits including Medicare, unemployment taxes, and Social Security. Because employers do not withhold these taxes for independent contracts, a W-9 form is necessary. A traditional W-9 includes the following information:

  • Identification information: This includes name, address, and tax ID number.
  • Agreement: The W-9 is essentially an agreement between the contractor and the employer that it is the contractor's responsibility to pay their own taxes. The W-9 is a document between the contractor and the employee and is never sent to the IRS for tax filing.
  • Income information: The business will fill out a 1099-MISC to list all payments made to the contractor. The W9serves as a form for filing taxes as an independent contractor.
  • Importance of accurate information: It is important that the information on the W-9 is accurate. Utilizing the services of a tax accountant is helpful for drafting and completing complicated W-9 documents.

Independent Contractors vs. Employees

Sometimes there are questions as to what separates an independent contractor from an employee. Sometimes the specific responsibilities and roles of each type are similar. These are the most important distinguishing characteristics:

  • Independent contractors have more control over the timeline and completion of their expected tasks.
  • Independent contractors do not receive benefits such as health insurance or 401(K).
  • Independent contractors are able to claim additional deductions such as home offices, mileage, and other expenses required to do business.

Who Needs to Fill Out an IRS Tax Form W-9?

Any employee that is not considered an actual employee of the business should fill out a W-9 form. These are often employees that are not needed in the business full-time because the requested work is temporary. The following types of independent contractors are often required to fill out a W-9:

  • Freelancers: This can include writers, researchers, and graphic designers.
  • Consultants: These are experts brought into a business to offer advice on finances, budgets, public relations, and personnel training.
  • Custodians or cleaning professionals
  • Landscaping professionals
  • Repair workers

Even contractors that work with a company for a long period of time require a W-9 form. There are other situations that might require a W-9 that do not include an employment basis:

  • Real estate transactions
  • Paid mortgage interest
  • Acquisition of an abandoned property
  • Canceled Debt
  • Contributions to an IRA

These are all examples of situations that the IRS views as earned income and thus, the person is subject to paying taxes on the income.

Receiving the Form 1099

It is possible that you will receive a W-9 at some point in your career. It is also possible that you may issue a W-9. If you fill out a W-9, you can expect to receive a 1099 with your reported income. The 1099 is an important document needed to file your income taxes at the end of the business year. It is important to include all income earned on the 1099 to prevent any additional taxes or penalties.

Returning a W-9

If you receive a W-9, it is important to fill it out as soon as possible. You will then return it to the person that requested it. You can mail the form or send it via E-mail. You will want to keep confidentiality in mind in whichever method you choose to return the W-9.

Requesting a W-9

If you are the one paying independent contractors, it is your responsibility to issue the W-9 if you pay $600 or more to your contractor. When it is time to send 1099s to your independent contractors, you will need the information on the completed W-9 form. You must also send the 1099 to the IRS to report the payments.

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