What is a W-9 form and how to fill it out?

The local, state and federal governments require collecting taxes from the citizens and businesses operating within their borders yearly. In 2019, more than $3.5 trillion was collected at the Federal tax level. Imagine all that raw data that must be manipulated and moved to complete this process. 

To save money for the taxpayers, the government created the W-9 form. It is a tax document that verifies certain information and helps keep track of the income produced by citizens around the country. It is an essential tool for operating the federal budget. 

What is a W-9 form?

The W-9 form is a tax information return used by the IRS (Internal Revenue Service) to confirm a person’s name, address, and TIN (taxpayer identification number) for employment or other income-generating purposes. This confirmation is collected for both citizens and those defined as resident aliens. It is often a method to control the illegal use of immigrants as employees in specific industries.
Anyone operating as an independent contractor still fills out a W-9 or files as some form of entity when completing their taxes. The W-9 can be used to generate a 1099 tax form. Strict privacy restrictions surrounding the release of this information protect individuals and employers.

Who has to file a W-9 form?

Self-employed workers like digital nomads, freelancers, independent contractors, and industry consultants commonly use the form. Anytime you earn more than $600 in the year without being someone’s employee, you are considered self-employed for that income. If your boss sends one to you, they view your role as an independent contractor, not a typical employee. You must submit one to the IRS when you change your name, business name, address, or tax ID number. Companies that usually send you a 1099 form with tax details at the end of the year also need a corrected W-9 form.

How to fill out a W-9 form?

You can see a copy of the W-9 form pictured here or visit this IRS link for a fillable PDF of the document. There are some simple instructions for filling out the form. The business that hires you should fill out its information and EIN (employer identification number). You are responsible for the rest.

W-9 form

Line 1 – Name

Fill out your full legal name that matches your tax returns.

Line 2 – Business name

If you have a legal entity, this is where you put its name. Otherwise, please leave it blank.

Line 3 – Federal tax classification

Here you define how you, the independent contractor, are classified. You have several options. You can use your SSN (social security number) if you operate under your sole proprietorship and haven’t been registered as any other type of business.

Line 4 – Exemptions

Only fill this out if you are operating as a business or entity with a reason for exemptions. If you are an individual, you can leave this blank.

Line 5 & 6 – Address, city, state, and ZIP code

It is the location where your employer will mail your information.

Line 7 – Account number(s)

An optional line to provide any account numbers your employer may need. Individuals may leave this blank.

Part I – Taxpayer Identification Number (TIN)

You either enter your SSN or your employer’s EIN. You use your SSN as an individual or sole proprietorship. You can also use your ITIN (IRS individual taxpayer identification number) if you are a resident alien.

Part II – Certification

It is where you sign and date the form stating that all information is accurate. Remember that this is a legal document, and falsifying information could lead to penalties.

What happens if you don't file or provide an incorrect W-9 form?

Filing a W-9 form is an integral part of operating a business, as it is used by the Internal Revenue Service (IRS) to collect information about independent contractors who provide services to businesses. The W-9 also helps the IRS determine how much income these contractors receive is subject to withholding taxes.

A business must obtain a W-9 form when it hires an independent contractor. The contractor must then fill out the form and provide it to the business. There can be severe consequences if the contractor fails to provide a W-9 or provides inaccurate information on the form.

1. You may be subject to a penalty – If the contractor fails to provide a W-9 form or provides inaccurate information, the business may be subject to a penalty. The exact penalty amount varies depending on the circumstances but can range from a few hundred dollars to thousands of dollars.
2. You may be required to pay taxes on the income – If the business does not have a W-9 form from the contractor, they may be required to pay taxes. This could include federal income taxes, state income taxes, and self-employment taxes.
3. You may be required to withhold taxes from the contractor – The business may also be required to withhold taxes from the contractor, such as federal income taxes and self-employment taxes. This means the business will have to pay these taxes on behalf of the contractor.
4. You may be subject to an audit – If a business fails to provide a W-9 form or provides inaccurate information, they may be subject to an audit. During an audit, the IRS will review the business records to ensure that all taxes have been paid correctly.

Filing a W-9 form is an essential part of running a business. It is vital to ensure that all the information on the form is accurate and filed on time. If the business fails to do so, there can be severe consequences. It is, therefore, essential to make sure that the business takes the necessary steps to file the form correctly to avoid any penalties or other problems.

The bottom line

That is it! The W-9 is a simple form. Half of the document contains instructions to follow as you fill it out. If you have more questions about what to enter, we encourage you to consult one of the H&S Accounting & Tax Services experts. We have years of experience completing IRS documentation and managing different entities’ financial and legal proceedings. Our team is here to provide you with the professional and timely service you need as a business owner to complete this information return.

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