What is a Form W-9?
Everyone knows that if you’re an employee of a company, you will be issued a W-2 form for tax purposes so that you can report to the IRS wages paid and taxes withheld from your salary during the tax year. But, what do you get if you’re not an employee of a company but received compensation for work provided to a company as an independent contractor (freelance/sole proprietor)? Nothing, if the earnings are under $600. If you earn $600 or more than the company will require you to fill out an IRS Form W-9 to collect your information.
What is the purpose of a Form W-9? It presents your taxpayer information to the company that you contracted with. It is a one-page informational form that individuals and small businesses utilize to present these key bits of information:
- Name of the Person and/or Business (if applicable and has a “doing business as” name or DBA)
- Employer Identification Number (EIN) or Social Security Number (SSN)
- Entity Type
The main item here is your Taxpayer Identification Number (TIN), which is either your EIN or SSN. Due to the highly classified nature of a person’s TIN, you must ensure the legitimacy of the entity requesting the form before sending it out. This form isn’t filed directly to the IRS, but rather returned to the requester which they will then use to issue said non-employee a Form 1099-MISC (which in short is a W-2 for independent contractors). Again, if you’re a non-employee who didn’t receive more than $600 during that calendar year for a company, you don’t need to fill out a W-9.
If you do have to fill out a W-9, filling out the form is pretty painless. You’ll input your legal name (as shown on your tax return) and the name of your business (if you operate under a DBA) at the top of the page. You’ll select the type of business entity you operate in the appropriate checkbox (whether it be as an individual, sole proprietorship, single-member LLC, C-Corp, S-Corp, Partnership, Trust/Estate, or LLC). After inputting your address and TIN, you’ll provide your signature and date of signing to complete the form. There is a section in the W-9 that covers Exemptions, which are codes that apply to specific entities, not individuals, to being exempt from backup withholding or Foreign Account Tax Compliance Act (FACTA) reporting requirements for financial institutions. In short, backup withholding is withholding taken from different forms of payments and income by companies and banks. You can find more detailed information on exemptions and backup withholding on pages 3 and 4 of the Form W-9 on the IRS website.