Form W-9
What Is a W-9 Form?
A W-9 form is an Internal Revenue Service (IRS) document that requests information from a U.S. citizen or resident alien for tax purposes.
This information—including name, address, and taxpayer identification number (TIN) for employment or other income-generating purposes—is then used to complete the IRS Form 1099, which is required for filing income taxes.
Who Needs to Fill Out a W-9?
Independent contractors and freelance workers must provide a W-9 Form to companies –including LLCs, S-corporations, and C-corporations– from which they earn more than $600 during the tax year.
These workers often complete a W-9 form at the same time they sign an independent contractor agreement.
The company, which is not required to pay Social Security or Medicare taxes or withhold income taxes for independent contractors, must use the W-9 forms to report how each contractor earned in that tax year.
The W-9 information is used to create a Form 1099, which is needed for income tax filing purposes.
When Should a W-9 Be Filled Out?
A business should request a W-9 form if it is paying someone under the following circumstances:
- The worker is not an employee.
- The work is for your business.
- The value of the annual payments is $600 or above.
At the end of the year, businesses are expected to tally up their payments to W-9 workers and report them to the IRS and the independent contractors, usually on Form 1099. Form 1099 lists the wages the employer paid to the independent contractor.
The contractor then files this form with the IRS and their state tax authorities.
Other situations that may require a W-9 form include taxpayers who collect interest or proceeds from a real estate sale, pay home mortgage or student loan interest, or have debt canceled.
Amounts earned under the $600 threshold must be reported to the IRS but do not require a 1099 form.
What Is Backup Withholding?
If taxpayers fail to provide needed information to the IRS, the IRS may charge a penalty called "backup withholding." The IRS can deduct a 24% tax from certain payments with this action.
The majority of taxpayers are exempt from backup withholding, but here are two types of backup withholding situations that can occur:
- Backup withholding "B": applies to taxpayers who do not provide a valid TIN or SSN to the IRS.
- Backup withholding "C": applies to taxpayers who fail to report interest or dividend income on their federal tax return.
The IRS applies the 24% deduction to taxes that are owed. Taxpayers may be able to get some of the penalty refunded if they file a Form 1040 showing the amount paid via backup withholding is greater than the amount owed for a particular tax year.
Other possible penalties
Other penalties for not submitting a W-9 include:
- $50 penalty for each failure to furnish a correct TIN to an employer unless you are able to prove the failure was not willful neglect.
- $500 penalty if you make a false statement with no reasonable basis that does not result in backup withholding.
- Additional penalties and possible jail time for willfully falsifying information or misusing another party's W-9 information.
The IRS offers detailed information on the W-9 form on its website.
Helpful Resources:
What Is a W-9 Form?
A W-9 form is an Internal Revenue Service (IRS) document that requests information from a U.S. citizen or resident alien for tax purposes.
This information—including name, address, and taxpayer identification number (TIN) for employment or other income-generating purposes—is then used to complete the IRS Form 1099, which is required for filing income taxes.
Who Needs to Fill Out a W-9?
Independent contractors and freelance workers must provide a W-9 Form to companies –including LLCs, S-corporations, and C-corporations– from which they earn more than $600 during the tax year.
These workers often complete a W-9 form at the same time they sign an independent contractor agreement.
The company, which is not required to pay Social Security or Medicare taxes or withhold income taxes for independent contractors, must use the W-9 forms to report how each contractor earned in that tax year.
The W-9 information is used to create a Form 1099, which is needed for income tax filing purposes.
When Should a W-9 Be Filled Out?
A business should request a W-9 form if it is paying someone under the following circumstances:
- The worker is not an employee.
- The work is for your business.
- The value of the annual payments is $600 or above.
At the end of the year, businesses are expected to tally up their payments to W-9 workers and report them to the IRS and the independent contractors, usually on Form 1099. Form 1099 lists the wages the employer paid to the independent contractor.
The contractor then files this form with the IRS and their state tax authorities.
Other situations that may require a W-9 form include taxpayers who collect interest or proceeds from a real estate sale, pay home mortgage or student loan interest, or have debt canceled.
Amounts earned under the $600 threshold must be reported to the IRS but do not require a 1099 form.
What Is Backup Withholding?
If taxpayers fail to provide needed information to the IRS, the IRS may charge a penalty called "backup withholding." The IRS can deduct a 24% tax from certain payments with this action.
The majority of taxpayers are exempt from backup withholding, but here are two types of backup withholding situations that can occur:
- Backup withholding "B": applies to taxpayers who do not provide a valid TIN or SSN to the IRS.
- Backup withholding "C": applies to taxpayers who fail to report interest or dividend income on their federal tax return.
The IRS applies the 24% deduction to taxes that are owed. Taxpayers may be able to get some of the penalty refunded if they file a Form 1040 showing the amount paid via backup withholding is greater than the amount owed for a particular tax year.
Other possible penalties
Other penalties for not submitting a W-9 include:
- $50 penalty for each failure to furnish a correct TIN to an employer unless you are able to prove the failure was not willful neglect.
- $500 penalty if you make a false statement with no reasonable basis that does not result in backup withholding.
- Additional penalties and possible jail time for willfully falsifying information or misusing another party's W-9 information.
The IRS offers detailed information on the W-9 form on its website.
Helpful Resources: