Table of Contents Hide
- What is W9?
- What Information Is on Form W-9?
- Who Needs to Fill Out a W9?
- How to Fill Out a W9
- What Is a W9 Used for in Business?
- W9 for Nonprofits
- Is a W9 the Same as 1099?
- How Will a W9 Affect My Taxes?
- Can I Refuse to Fill Out a W9?
- What Happens if I Don’t File a W9?
- How Much Can You Make Without a W9?
- Why Would Someone Need a W9 From You?
- Similar Articles
Nothing in life is certain except for death and taxes, or so the old adage goes. Even if you have to face tax preparation every year, it never gets easier. After all, few individuals start businesses because they enjoy filling out tax forms (unless they go into the accounting field, of course). It’s up to you to decide how big of a nuisance tax season will be. Businesses that prepare for tax season by gathering all necessary documents and records in advance (and perhaps even employing a tax expert to help with filing) will have minimal downtime. If you don’t gather data ahead of time, you’ll be stressed out trying to find important papers and emails to meet filing deadlines. In this article, we will discuss what W9 is used for in business, in a nonprofit organization, and how to fill out the form.
What is W9?
A W9 form is an IRS form that is used to give a person’s Tax Identification Number (TIN) to their payer or whoever is responsible for making an information return with the IRS. The W9 form is called the Request for Taxpayer Identification Number and Certification form by its full name.
A W9 is used by a business to report payments made to contractors, freelancers, and other suppliers to the Internal Revenue Service. Which form (W-9 or W-4) do you need to fill out? The answer will vary if you’re an independent contractor or an employee.
Furthermore, a request for Taxpayer Identification Number and Certification, or Form W9, is used by a business to acquire tax information from freelancers, consultants, and other suppliers. The W-9 form is to be filled out by the contractor or vendor and sent to the company paying them.
What Information Is on Form W-9?
Your name as it appears on your tax return goes on the first line. This section is simple if you are an individual and record your contract employment earnings on Schedule C, Profit or Loss from Business. Your own name should go on line 1 if you’re a lone owner or a one-person limited liability business (LLC). If filing as a partnership, an LLC with numerous members, a C corporation, or an S corporation, use the legal name of the company.
Also, if you own a business, you can list it here on the second line. Line 2 is where sole proprietors and single-member LLCs should list their business or “doing business as” name (DBA). Line 2 is where a partnership, multi-member LLC, C corporation, or S company should list its trade name, DBA, or other alternate names.
In the third section, you’ll indicate how the individual or business in line 1 is taxed by the federal government. Please choose only one. If you select the Limited Liability Company option, you’ll have to justify your business’s tax status. You can choose between:
- Trust/ Estate
- Individual/Sole proprietor or single-member LLC
- S Corporation
- C corporation
In line 4, you can insert a code to explain why you are free from backup withholding.
Also, your address should go in Line 5. Please provide your full address, including any apartment or suite numbers. Your address (city, state, and zip code) is on Line 6. The IRS will send your 1099-NEC or 1099-MISC to this address. In addition, if you intend to submit your taxes, you’ll want to include this data.
Who Needs to Fill Out a W9?
A W9 form must be filled out by any independent contractor whose annual earnings will exceed $600. A W9 is also required of anyone who receives more than $600 in untaxed yearly income from royalties, rent payments, prizes, and awards.
Instead of turning in W9s to the IRS, the asking business keeps them on file for tax time. The following situations call for a W9 form:
- Lenders frequently waive or significantly reduce debt obligations like credit card balances and mortgage interest payments.
- When a company needs to bring on a worker who will bring in more than $600 in income, they turn to independent contractors.
- A real estate transaction, such as the sale of a home or other property, in which a taxpayer participates.
- A financial institution that runs a taxpayer’s investment portfolio.
How to Fill Out a W9
If filling out tax forms gives you the willies, don’t worry; Form W-9 is one of the simplest IRS documents. We’ll show you the right way to finish it. The IRS website has all of the pages for Form W-9. In addition, the IRS form may come with its own unique set of instructions. Here are some simple steps on how to fill out a W9.
#1. W-9, Line 1
Type in your name exactly as it appears on your tax return.
#2. W-9, Line 2
If your company name or ” entity” name differs from the one you used in Step 1, insert it here. If you’re a sole owner but don’t want to use your own name while promoting your company, you can use a fictitious name by “doing business as” anything else. This is the place to type in that monicker.
One-person limited liability companies are frequently overlooked. Also, the classification of sole proprietorships and S corporations as disregarded entities is never used.
#3. W-9, Line 3
Please indicate whether your firm is a sole proprietorship, partnership, corporation, limited liability company, trust, estate, or “other” for federal tax purposes. Only one category should be selected, so make sure you check the right box.
Also, as part of the instructions for Form W9, the IRS provides a summary table to help you decide which business organization to list.
#4. W-9, Line 4
Exemptions. It’s likely that you’ll just leave these fields blank. There are, however, the following two cases:
- In some circumstances, the “Exempt payee code” field must be used to indicate that the recipient is exempt from backup withholding, such as in the case of corporations. Exempt payees and their respective codes, as well as the categories of payments that require these codes, are detailed in the Form W-9 instructions. Code “5” would be entered on a W-9 by corporations that have received interest or dividend payments.
- The “Exemption from FATCA reporting code” field is for payees who are exempt from filing tax returns under the Foreign Account Tax Compliance Act (FATCA). Most independent contractors will not fit into either of these categories.
#5. W-9, Lines 5-6
Your street address, city, state, and zip code are all necessary. Make use of the mailing address listed in your tax return. For simplicity’s sake, let’s say you’re a sole proprietor that rents office space but files their taxes using their home address. In this case, you should provide your home address on form W-9 so the IRS can match your 1099s and 1040s more easily.
In addition, the W9 form could be the sole mechanism by which a business obtains your individual data. When you are set up as a supplier in their records, this information may be entered into their accounting system, and you may receive your 1099 or other tax forms in the mail at this address.
#6. W-9, Line 7
Identifying the requesting party by name and postal code is optional. Check this box if you want a record of the entities you’ve shared your tax ID with.
In addition, at the bottom of this first portion of the Form W-9, you can include account numbers if necessary. To identify a specific user in the client’s system, provide their account number here. You might be asked to complete a W-9 form, for instance. Given that you’re supplier #45 in their system, you might be asked to write that number here.
#7. W-9, Part I
The IRS calls the next section Part I. If you’re a solo owner, enter your own Social Security number here; if you’re a corporation or other business entity, provide your employment identification number (EIN).
While some sole proprietorships do have EINs, the IRS advises individuals to utilize their SSNs instead when filling out Form W-9. If you file your taxes using your Social Security number, this will make it simpler to match any 1099s you receive with your tax return.
What if you don’t yet have an EIN for your company? The W-9 form is still available for completion. The IRS instructs taxpayers to fill out the TIN application and note “applied for” in the appropriate field. Until you provide this number, you will be subject to backup withholding, so receive it as soon as possible. The IRS website is where you should go to apply for an EIN. For further information about backup withholding, please refer to Part II of Step 8 below.
#8. W-9, Part II
Before signing Form W-9, you must verify the accuracy of the information provided in Part II. If you knowingly submit a false tax return, you could face serious consequences, including fines and perhaps jail time. You must swear (under penalty of perjury) that the following statements are true before signing form W-9.
- I certify that the taxpayer identification number listed here is mine (or that I am currently applying for one). Legal taxpayer-identification numbers must be used. Lying under oath by using a “borrowed,” stolen, or fabricated tax ID number carries severe penalties.
- I do not have to worry about backup withholding because (a) the law specifically exempts me from it, (b) the IRS has not informed me that I need to report all of my interest and dividends, or (c) the IRS has informed me that I am no longer subject to backup withholding.
- I am a legal resident or citizen of the United States. If you are a legal permanent resident, you are safe. The Internal Revenue Service also classifies as a “U.S. person” any domestic estate or domestic trust, as well as any partnership, corporation, firm, or association formed in or structured under U.S. law. Read the Form W-9 instructions carefully if your business is a partner with a foreign partner. Form W-8 or Form 8233 might be necessary for non-U.S. citizens.
- I confirm that the FATCA exemption code(s) I have provided on this form is accurate. This one, relevant to the Foreign Account Tax Compliance Act, is probably not anything you need to stress over.
What Is a W9 Used for in Business?
The information presented on W9 forms is used by a business to prepare and submit Form 1099, a tax information return used by independent contractors to record income, and by the IRS to monitor the reporting of income earned by non-employees.
Employers who have workers are legally bound by law to withhold a portion of their employees’ pay to pay for Social Security and Medicare. However, independent contractors are responsible for completing their own income tax returns and often have no taxes withheld from their pay. Because of this, companies must issue Form 1099s to all freelancers, consultants, and independent contractors paid more than $600 in a given tax year.
It is recommended that all independent contractors, for instance, produce a fully filled W9 form prior to beginning work with your business. This verifies the contractor’s legitimacy and provides your company with the data it needs for accounting and reporting purposes.
W9 for Nonprofits
Many executives in the nonprofit sector are likely to be frustrated by the fact that their organizations need to practically breathe bureaucracy in order to keep their tax-exempt status and fulfill their objectives. Also, read HOW TO START A NONPROFIT IN 2023: Step-By-Step Guide.
While the nonprofit version of Form W9 adds yet another form to the never-ending pile, at least it’s easy to understand and fill out.
What is the Form W9 for Nonprofits?
The “Request for Taxpayer Identification Number and Certification” (Form W-9) is the document to utilize when another business or government agency seeks your nonprofit’s TIN. When registering with the IRS for an EIN using Form SS-4, a nonprofit organization receives a TIN at the same time. Although it is the most important piece of data being transmitted, the form also includes:
- The name of your nonprofit organization
- The address of the organization
- The type of entity
- The organization’s TIN
What Is a W9 Used for Nonprofit
If your nonprofit needs to share its Taxpayer Identification Number (and the information that goes along with it) with another organization so that it can file an information return with the IRS, you will need to fill out W9. The Taxpayer Identification Number (TIN) of your company could be required for a variety of uses, such as:
- You’re getting money from a different company.
- Organizational and real estate transitions
- Mortgage principal payment
- Buying, selling, or giving up property
- Relief from debt
- The Investing in Retirement Account Contribution
How to Fill Out a W-9 for a Nonprofit Corporation
The following details how to complete the relevant sections of the W9 form for a nonprofit corporation.
- Name. Give the full legal name of the organization as it appears on IRS 990s and other organizational paperwork.
- Business name/disregarded entity name. You should include a “dba” or trade name here if your nonprofit operates under a moniker other than the one stated in its bylaws. Leave this field blank if your organization does not use a dba.
- Federal tax classification. Choose “other” and write “Nonprofit corporation exempt under IRS Code Section ____.” for the federal tax designation. Enter 501(c)(3) to find your organization’s tax-exempt status.
- Exemptions. Enter a code here to avoid filing a backup withholding or Foreign Account Tax Compliance Act report. Companies qualifying under Section 501(c)(3) of the Internal Revenue Code can disregard this section. See the instructions for IRS Form W-9 or talk to an accountant if you have questions about exemptions.
- Address. Please fill out the following sections with your organization’s mailing address.
- Taxpayer identification number. For federal tax purposes, a nonprofit organization’s TIN or EIN is like a person’s Social Security number. Filing IRS Form SS-4 will get your nonprofit organization an EIN if it doesn’t already have one. An EIN can be requested online and obtained instantly. If you have an EIN, you can fill out the W-9 form with that information. You may indicate “applied for” on the W-9 form if you have applied for an EIN but have not yet obtained it. Don’t provide your Social Security number in the spaces provided.
- Certification. Put your name and date on the declaration. You can rest confident that you have not been subject to backup withholding because you gave the correct taxpayer identification number.
Is a W9 the Same as 1099?
Contractors fill out a W-9 form to give their information to the company they work for, and the company then uses that information to fill out a 1099 form to report the contractor’s annual earnings to the IRS.
How Will a W9 Affect My Taxes?
The employer will not withhold any of your taxes if you submit a W-9. You need to make sure the correct taxes are paid to the government. However, you must also cover both the employer and employee halves of Social Security and Medicare taxes.
If you’re a contract worker, freelancer, or solo entrepreneur, you need a W9 form to file your taxes. Your employer has no obligation to withhold any taxes from your paychecks, and by completing a W9, you are confirming that you will be responsible for doing so on your own.
However, you should not submit this form to the Internal Revenue Service. You deliver it to the soliciting employers. Filling out a W9 is straightforward, but you should always do a final check to make sure everything is correct. If you need help understanding your tax forms, you may want to consult a tax professional.
Can I Refuse to Fill Out a W9?
Yes, you have the right to decline to fill out a W-9 form if you have doubts about the legitimacy of the company requesting it. Don’t rush into filling out a W-9 if the company isn’t using it for tax purposes. Also, full-time workers are exempt from completing a W-9 form.
What Happens if I Don’t File a W9?
For each form that fails to appear, a fine of $50 to $270 may be imposed. However, if you are a business’s payee, contractor, or vendor, you must complete a W-9 form or face potential IRS fines.
How Much Can You Make Without a W9?
Any individual or organization who receives more than $600 in payments from your small business during the particular tax year must complete a W-9 form.
Why Would Someone Need a W9 From You?
As soon as you begin working with a customer or an organization as a contractor, they should ask you for a W-9 form. The information on the form tells the hiring party whether or not they need to file 1099 on your behalf with the IRS.
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