A W-9 is an Internal Revenue Service (IRS) tax form. If you’re on the receiving end of a W-9, rest assured that it’s just for verification purposes. In order for the company that’s paying you to issue you a 1099 and pay their own taxes, they need to first verify your TIN (or your Taxpayer Identification Number.) Unless you’re also operating as a business that’s not a sole proprietorship, this will be your social security number.
Once they verify your TIN with the IRS, you’ll be able to get your 1099 and file your own taxes.
If you’re the client, who needs to find a W-9 to give your contractors or freelancers, you can find it online pretty easily. Though most payroll software, especially the newer ones, will remind you and send them out for you.
If you lost your social security number, I should stop you here. Do not pass go, or collect $200 or whatever, you need to find your social security number. Like yesterday.
Who Can File A W-9?
W-9s don’t need to be filed with the IRS unless you’re specifically asked to by the IRS or an auditor. And, in those cases, it would be the responsibility of whoever the IRS asked to submit them. Under normal circumstances, however, it just needs to be filled out.
Again, this document is typically filled out by freelancers and contractors. If you are given a W-9 by your client, then you need to return the completed form to them, not the IRS. Again, unless the IRS asked you to submit it to them for some reason, then it would need to go to both.
If you’re the client, it’s your responsibility to obtain, send, and receive your contractor or freelancer’s W-9. You will also need to retain a copy of the form but, again, you don’t need to send it to the IRS unless asked to do so.
What Are W-9s For?
The information from a W-9 is most often used to create a 1099. A 1099 is a modified version of a W2. Because the differences between how an employee is compensated can be drastically different from a freelancer or contractor.
Since the end results (a 1099 or a W2) are also drastically different, they made a W-9 for contractors or freelancers, instead of a W-4 used by employees. A W-2 allows for weird payment circumstances some freelancers of contractors might find themselves in that employees almost never will. Things like partial contract payments, real estate transactions, and dividends paid against investments.
However, this form only needs to be filled out once the minimum threshold is reached. Which for most miscellaneous income is set at $600. Amounts under this threshold must be reported as income by the person who made the money but does not require a 1099 form.
How To Fill Out A W-9
W-9s are pretty straight-forward to fill out, but they can still look intimidating when you look at them your first time. If that sounds like you, rest assured that it’s super easy once you get past the intimidating look.
Line 1: Your name – which, in most cases, is pretty straight-forward. It’s the name that’s going to be on your tax return.
If you’ve recently legally changed your name, it’s going to be your new legal name. If you’re going to change your name by the time you file your tax return but not by the time you’re filling out your W-9, you should put your current legal name. However, once your name changes, you should report your name change to the SSA before you file your tax return.
Line 2: Your business name. If you don’t operate as a business and the only name you – as a freelancer or contractor – use to market yourself is your real name, then you can skip this step.
If you have a business name, however, that goes on this line. Or go by a different name for “doing business as” instead.
For example, “Bob Smith”, but doing business as “Writing Person”, Writing Person would go on line 2.
Additionally, disregarded entity names” also go on this line as well if the above doesn’t fit. If you’re not sure if you have one of those, rest assured, you’re probably not. Most commonly in this situation, it’d be a single-member limited liability company (SLLC.)
Line 3: What type of business entity are you for federal tax classification? Sole proprietorship, partnership, C corporation, S corporation, trust/estate, limited liability company, or “other”?
If you don’t know, you’re most likely a sole proprietorship, but check the instructions on the back of the form for “other” to be safe.
Box 4: In most cases, these exemption boxes are going to be left blank.
In the event you’re a corporation however, you may be exempt from withholding. The W-9 instructions on the back of the form list the exempt payees, exemptions, and their codes. Corporations filling out a W-9 for receipt of interest or dividend payments, for example, would enter code “5.”
And payees that are exempt from reporting under the Foreign Account Tax Compliance Act (FATCA) might need to enter a code in the “Exemption from FATCA reporting code” box. Again, see instructions for specific exemption codes.
But, again, these can be skipped in most cases.
Lines 5 – 7: In most cases, this step is pretty straight-forward and you’ll know if it’s not for you.
If you have a home and business address that are different, use whichever address you’re going to use on your tax return.
Requester’s Name: This is an optional step that can be skipped, but if you want to know, it’s for adding the information of whoever sent you this form so you can keep records of who requested your information.
Part 1 W-9: Kind of a misleading name, but this is the part where you add your social security number if you’re an individual or a sole proprietorship. Even if you have an EIN as a sole proprietorship, the IRS prefers you use your social security number here.
If you’re a different kind of business, like an SLLC, you would use your EIN.
If you’ve applied for an EIN but don’t have it yet, just write “applied for” in this space. You’ll want to get this number as quickly as possible because until you get it, you’re subject to backup withholding.
Part 2 W-9: Before you can sign and submit your W-9, you need to attest that everything you’ve put on the form is accurate. Intentionally lying is perjury and punishable by fines and jail time. It’s nothing to worry about if you’re putting everything down the best you can, they’re not going to lock you away for accidentally filling out the form wrong (which is hard to do, by the way), but you should check the following statements you’re signing:
- The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me).
- I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding.
- I am a U.S. citizen or other U.S. person. (**Legal team note: this includes resident aliens as well)
- The FATCA code(s) entered on this form (if any) indicating that I am exempt from FATCA reporting is correct.
An interesting loophole:
You’re not legally required to sign your W-9 for it to be valid. However, I don’t suggest this. Whoever sent it to you – likely a client – will be looking for your signature to make sure it’s valid. Though it is valid without one, we doubt you’ll be able to convince many people of that.
And arguing with a client about the legalities of not needing a signature is not a path I suggest you take. Particularly if you want to keep working with them.
Nonetheless, you don’t actually need to sign it since it’s not actually being submitted anywhere.
Returning Your W-9
Again, this doesn’t need to be submitted to the IRS, you just need to give it back to whoever requested it from you. Ideally, in person, but I know as well as anyone that that’s not always practical. Particularly for freelancers.
Mail is a relatively safe way to deliver the form to prevent identity theft, particularly if you have a tracking number. However, many employers now send and receive their W-9s through their payroll software which has bank-level encryption and is a much safer route than mail.
Email is absolutely the last resort here since it can easily be hacked or accidentally transferred.