The W-9 form is an Internal Revenue Service tax form. It is also known as Request for Taxpayer Identification Number and Certification form.
The W-9 form is used to confirm the name, address, TIN (Tax Identification Number) for employment and all other income-generating sources or purposes.
This form needs to be filled by US residents or US citizens.
It is an official form that is regulated by the IRS for employers to verify the name, address, and TIN of an income receiving individual.
Purpose of W-9 Form
The W-9 form is one of the most commonly used IRS forms. There are numerous purposes of filling a W-9 form. On a general basis, there are two reasons and these are:
- To verify the name, address, Tax Identification Number, and the source of income of an individual. It helps the government to determine the source of your income through which you will pay the annual federal taxes.
- When you are employed as a freelancer or you have your own business, then your client may ask you to fill the W-9 form so that they can prepare an annual report at the end of the year regarding the payments they have made to you.
Uses of W-9 Form
The W-9 form is used to verify the name, address, source of income, and Tax Identification Number of an earning employee.
W-9 is used to generate the variant of Form 1099. 1099 from have all the information regarding the source and amount of income which an individual might have received.
The cases are listed below:
The form is generally filled in the case of a business-contractor agreement. In the case the business employer pays more than $600 to its contractor, then the business employer needs to file the form 1099. To fill this form certain information of the contractor is required. In this case, the business employer may ask or request the contractor to fill and submit the W-9 form.
Avoiding backup withholding
Filling W-9 form helps the payee to avoid backup withholding.
The payer must collect the withholding taxes on payments which are reported annually. In case the payee fills the W-9 form then they generally receive full due payment from the payer.
Financial institution-customer arrangement
In some cases, financial institutions or banks also request their customers to fill the W-9 forms. It is done to gather and verify the correct details of every individual.
Regularly the W-9 form is not filled in the case of employer and employee. But in rare cases, the employer requests their employees to fill this form to maintain the records.
Terminologies used for W-9 Form
You should be aware of some terms which you will come across while filling the W-9 form. To avoid confusion and to improvise the understanding regarding form, review these terms:
- TIN (Taxpayer Identification Number): For employees or general individuals, the Social Security Number is their TIN. In the case of business running bodies, their Employer Identification Number is their TIN.
- Backup Withholding: It may occur in the case when the taxpayer did not send the correct report of the income to the IRS. The share of income is kept on hold from the taxpayer’s payments received and is then forwarded to the IRS.
- Exemptions: This section of W-9from is for particular bodies or for the persons who are working for those particular bodies. These bodies are asked to enter the allotted code from the instructions part of the W-9 form.
Who needs to file a W-9 form?
The W-9 form applies to self-employed individuals. Self-employed workers include freelancers, contractors, tuition teachers, and consultants. The individuals who can make an income of more than $600 within a year without being working as an appointed employee for any of the company.
If the income generated is less than $600 in a year, then you are not supposed to fill this form. W-9 form helps the business bodies to keep and maintain the records of their external manpower. In this scenario, the freelancer or the private contractor is asked to fill and submit the W-9 form to their senior authority instead of sending directly to the IRS.
If you are working for different companies, then you can easily fill the same number of W-9 forms in the year.
How to Acquire a W-9 Form?
Generally, the employer or the bank automatically issues the W-9 form. I
n case you do not receive it or you need the form from your end then you can easily download it from the IRS website under the section Download W-9 form.
How to Fill a W-9 Form?
Filling W-9 form correctly and completely involves numerous steps. These are as follows:
- Enter your name, as it on the tax return.
- Enter the name under which you are running your business. Either it is the same or different from the name which you entered through step 1.
- Choose the correct type of business body that you are running. It will decide the percentage of the tax that you will need to pay.
- The next step is to check for the column of exemptions. Probability is that you will be leaving this column empty, but there are some exceptions as well. Those exceptions are:
- Corporation payees need to enter a code in the Exempt payee code box. The code which is to be used according to your type of payment is all mentioned in the instructions list.
- Payees which comes under the act FATCA, need to enter their specific code in Exemption from FATCA reporting code box.
- The next column in the form is to fill the address in the form. Provide the same address on this form which you have mentioned in the tax return form.
- This is the optional step. In this column, you can mention the name and address of the person to whom you provided your TIN.
- Further, the form is divided into 2 parts: Part I and Part II. The complete form has all the instructions, read them carefully according to your business type and then fill the columns.