Have you been asked to submit a W-9 form? The most recent version of the W-9 form is easier to use because the designation for different types of businesses is easier to figure out. It still offers some challenges, however, and you'll want to take care to complete it correctly.
What Is Form W-9?
IRS Form W-9 is officially titled the "Request for Taxpayer Identification Number and Certification." It records the tax ID numbers for workers who are not employees and it records the statement of the person completing the form swearing that:
- The taxpayer identification number is correct. This can be a Social Security number or the employer identification number (EIN) for a business.
- The taxpayer is not subject to backup withholding. Backup withholding is required withholding by employers for individuals who have not included a valid taxpayer identification number on Form W-9. Backup withholding is implemented at the rate of 24 percent as of 2018.
- The individual is a U.S. citizen or "other U.S. person."
- Any FATCA (Foreign Account Tax Compliance Act) codes on the form are correct. FATCA reports are required of U.S. citizens to report foreign financial assets held outside the U.S.
Form W-9 for non-employees is comparable to Form W-4 for employees, the Employee's Withholding Certificate.
When is a W-9 Form Necessary?
You must get a W-4 form for non-employees (independent contractors, freelancers, and others) before the person is hired and before the work begins. Beginning in 2020, the information on the W-9 is used to complete a 1099-NEC form reporting non-employee income for a tax year (like a W-2 form for employees).
The employer must include the appropriate taxpayer identification number on each payment to the non-employee, and the total of all payments for the year must be included on the Form 1099-NEC that's provided to the worker and to the IRS.
Form W-9 is also used to report:
- Real estate transactions
- Mortgage interest
- Acquisition or abandonment o secured property,
- Cancellation of debt, and
- Contributions to an IRA.
How to Complete the W-9 Form
Line 1: Name
This is the name of the individual who is completing the form. It should be the name appearing on the person's individual tax return.
The term "disregarded entity" is mentioned in the instructions for this line. A disregarded entity is a business entity that is not separate from its owner (basically, a single-member LLC). You'll see where this comes into play in Part II below.
Line 2: Business Name/Disregarded Entity Name
Enter it here if you use a business name, a trade name, or a DBA (doing/business/as) fictitious name that has been recorded. You would also use this line for a disregarded entity name.
Line 3: Federal Tax Classification of Your Business
This is the part that has been made easier. Check the first box if your business is a sole proprietorship or a single-member LLC. A sole proprietor business operates under the owner's Social Security number and has not registered with the state as any other type of business. A single-member LLC is an LLC with just one owner and it's taxed as a sole proprietorship.
If you're not sure of your business type, you're probably a sole proprietor, but check with your attorney or tax advisor to be sure.
Check the "LLC" box if your business is an LLC with multiple members. Then you must check the box corresponding to your LLC's tax status. If your LLC has not filed a request to be taxed as a C corporation or an S corporation, the LLC is taxed as a partnership.
Check the appropriate box if your business is registered with the state and is taxed as a C corporation, S corporation, or partnership.
Line 4: Exemptions
This section describes two types of exemptions.
Backup withholding. Most individuals and business types are not exempt from backup withholding, but your business might be exempt from backup withholding for certain payments if it's a corporation. Check with your tax advisor to be sure. The default is that you are not exempt.
FATCA reporting. The IRS says, "These codes apply to persons submitting this form for accounts maintained outside the U.S...If you are only submitting this form for an account you hold in the U.S., you may leave this field blank."
Lines 5 and 6: Address Information
Complete this section using the address where you want your 1099-MISC to be mailed.
Line 7 is optional.
Part I. Taxpayer ID Number
If you're a sole proprietor, enter your Social Security number in Part I even if you have an EIN.
If you are the sole owner of an LLC (a Single-member LLC), you are probably considered a disregarded entity for tax purposes. This designation sounds complicated but it just applies to single-member LLCs.
In other words, in almost every case you will enter your personal Social Security Number, not the EIN of the LLC.
If you are an owner (member) of a multiple-member LLC that's classified as a corporation, S corporation, or partnership, enter the company's EIN. (The default is a partnership.)
If your business is a corporation, S corporation, or partnership, enter the business EIN.
Please check with your tax professional or call the IRS directly if you're confused about what taxpayer identification number to include on this part of the form. Failing to include the correct number can result in issues with your payments, backup withholding, and your tax return.
Part II: Certification
You must certify that the information you've provided is correct, especially as it relates to your taxpayer identification number, your exemption from backup withholding, and your FATCA reporting status. If the information isn't correct or you included false information, you could be charged with a crime. Read and follow the certification instructions carefully.
Don't forget to sign the form!
You can complete the W-9 form online (this is a "fillable" file) and save it as a PDF document. Keep it in a secure place since it has your tax information on it! Then you can use it for any requests you receive.
Disclaimer: The author is not an attorney or tax professional and the information in this article and on this site is not intended to be tax or legal advice. Consult your attorney or tax professional if you have questions or concerns about this form.