How to Complete the Easier W-9 Form
For Independent Contractors and Other Non-Employees
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. A lot depends on its accuracy.
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 certification of the person completing the form attesting that:
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. FACTA reports are required of U.S. citizens to report foreign financial assets held outside the U.S.
How to Complete Form W-9
Form W-9 for non-employees is comparable to Form W-4 for employees, the Employee's Withholding Allowance Certificate. Form W-9 must be completed for all non-employees so the Internal Revenue Service can match income for these individuals with the annual tax report, Form 1099-MISC, that's required to report income for these individuals.
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-MISC that's provided to the worker and to the IRS.
The W-9 form is also used for other purposes and this can make the instructions confusing. W-9 forms are also used for interest income, dividend income, and barter transactions as well. They're used for real estate transactions, mortgage interest, and other payments.
Form W-9 includes 7 lines.
Line 1: Name
This is the name of the individual who is completing the form. It should be the name appearing on his individual tax return.
The term "disregarded entity" is mentioned in the instructions for this line. A disregarded entity is a business entity that is separate from its owner. Don't include a disregarded entity name on Line 1.
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.
If your business is a single-member LLC that is a disregarded entity, check the "Individual/sole proprietor or single-member LLC" box. If your business is an LLC with multiple members, check the "Limited Liability Company" box.
Then you must check the box corresponding to your business 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. The first is "exempt from 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. Again, check with your tax advisor to be sure.
The other exemption is "exempt from 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: Account Numbers
The taxpayer identification number is the trickiest part of the form and this hasn't been made easier.
If you're a sole proprietor, enter your Social Security number in Part II even if you have an EIN. Enter the owner's SSN or EIN if you're a single member LLC disregarded entity. And if you're part of a multiple member LLC that's classified as a corporation or partnership, enter the entity's EIN.
Please check with your tax advisor 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.
In the Part III section, 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. This is a legal document, so read and follow the certification instructions carefully.
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.