W-9 Form Overview

Those who should fill out a W 9 are those who are working as independent contractors or freelancers, because the W-9 is the form used by the IRS to help gather information about such workers. The W-9 form is an informational reporting tax form, meaning that it provides information to the IRS about taxable entities. It is not used to collect taxes. In this case, W-9 forms provide information on who is working as an independent contractor, information that the IRS uses to find out how much taxes contractors should be paying.

W-9 Form Purpose

Although the W-9 form is used to collect information for the IRS, it is not sent directly to the IRS. Rather, businesses who hire independent contractors are required to provide this form to the contractors, who in turn fill it out and return it to the contracting business. The business in turn uses the information provided by the form to fill out a 1099-MISC form, which will be sent to the IRS if the contractor is paid $600 or more by that business in a tax year.

This reporting is necessary because businesses are not required to pay Social Security or Medicare taxes or withhold income taxes on independent contractor wages–these come out of the taxes of the independent contractors. Thus, the IRS needs to know who is paid and how much so they know who owes those taxes, and the W-9 provides the personal information necessary to know this.

Who Must Complete the W-9 Form?

Aside from financial institutions sometimes using W-9 forms to obtain information from customers to report interest or dividends, the W-9 form is used exclusively by independent contractors. An independent contractor can be distinguished by the following characteristics:

  • They have a majority of control over when and how they complete a task.
  • They do not receive health insurance, 401(k) matching, and other benefits from employers.
  • They pay all their own taxes.

Examples of independent contractors may include:

  • Consultants
  • Graphic designers
  • Writers
  • Artists
  • Actors
  • Musicians
  • Custodians
  • Landscapers
  • Repair persons
  • Architects
  • Accountants
  • Private investigators

Completing the W-9 Form

To compete the W-9 form, the following information must be provided:

  • The independent contractor’s name.
  • The name of the contractor’s business, if it differs from the contractor’s name.
  • The business type (partnership, sole proprietorship, corporation, limited liability company, etc.).
  • The independent contractor’s address.
  • The independent contractor’s taxpayer identification number (TIN) or Social Security number.

Those who fill out Form W-9 must also certify that they are exempt from backup withholding. Most taxpayers are, but if that is not the case, the hiring company will need to withhold 24% of the contractor’s pay for income tax.

Because the W-9 also requires a Social Security number or tax ID, it should be guarded carefully to protect from identity theft. With similar concerns, one should be hesitant if they receive a W-9 form from a source they don’t know. They should also have concerns if they receive a W-9 form from a company for whom they are supposed to be working as a regular employee; the company may be trying to defraud them of benefits they are entitled to by counting them as an independent contractor.

W-9 Forms and LLCs

If an LLC operates as an independent contractor for other companies, then it too must complete a W-9 form. To do so, the following special considerations should be taken for the form:

  • If another LLC owns the LLC, the owned LLC should indicate both that it is an LLC and that its parent company is an LLC.
  • If the LLC is a single-member LLC, then the tax classification of the owner should be indicated.
  • If the LLC is owned by an individual and not another entity, then that individual must put their name on the “name” line and their LLC’s name on the “business name line.”
  • If the LLC is owned by an individual, a Social Security number is preferable for the form than the LLC’s employer identification number (EIN).

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