IRS Form W-9 – When do I need one?

IRS Form W-9: Can you believe that the W-9 one of the most confusing tax forms out there? Designed for individuals that working in a foreign country, it can be very difficult to understand. For self-employed individuals who need to establish their tax basis, or reduce their tax liability, they’ll need to complete an IRS Form W-9. The purpose of the form to determine how much income tax has been withheld from payments made to you for your work.

To understand more about W-9 Form, you need to know what it’s important, who needs one, and when do you need it.

irs form w9

What is a W-9 Tax Form?

W-9 Form usually known as “Request for Taxpayer Identification Number”. It used mostly to collect TIN or SSN from a person or a business. In other words, this tax form used to collect complete information about the contractor like name, TIN, individual type, etc.

What information is on W-9?

Here the required information you can find on the W-9 Form:

  • The first line the contractor’s name. Ensure to provide the name as shown on the tax return.
  • The second line provides the business name of the payee.
  • On the third line check the federal tax classification. This includes Individual / sole proprietor or single-member LLC, C corporation, S corporation, Partnership, Trust/estate, LLC.
  • Line 4 explains your exemption i.e., backup withholding taxes if any.
  • On line 5 you must provide your address.
  • Line 6 your city, state, and zip code.

When you are asked to fill out a W-9 Form?

The general rule that contractors must fill out this tax form when a business pays him/her for services performed apart from a regular employee.

For example- If you do consult or gig work for a business but not as an employee, then you will be likely asked to fill out a W-9 Form.

As per the IRS rules, when a business pays you $600 or more in a calendar year, it reports the information to the IRS using 1099 Forms. To report the payment information accurately it requires your name, address, TIN, etc.

When Do I need to request a W-9 Form?

As per the IRS norms, business owners responsible to collect W-9 Tax Forms from the person whom they hire apart from a regular employee. Or else, small businesses must collect a W-9 Tax Form for whom they pay more than $600 in a year for services performed apart from employees. The IRS recommends every business owners collect W-9 Tax Forms at the starting of the contract only. Because it helps in avoiding backup withholding taxes from the contractors.

E-File 1099 Form

Yes, the payee may face penalties for failure in providing the requested Taxpayer Identification Number. Additionally, there are penalties for providing false TIN. The penalty for failure to furnish TIN when requested equal to $50. The penalty for providing incorrect TIN nearly $500. So, the best practice for an independent contractor to provide the correct TIN within the requested time.

As an independent contractor or vendor, an IRS Form W-9 something you must submit to the business that pays you. These forms used to verify your name and address. Also, f you use a specific method for filing your income taxes. The IRS needs this information to ensure that you are still working honestly for that business, that they aren’t paying you less than they should be, and that they pay you the proper amount of tax. If the business does not receive their Form W-9 before the end of the month, considered a late submission. Late submissions can result in consequences, including interest penalties on taxes already due.

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File IRS 1099 Form