This article gives information about the W-9 form for both businesses requesting this form and those who must complete it.
What Is Form W-9?
IRS Form W-9 is used to provide a taxpayer identification number (TIN) for various types of payees. A common type of payee who must complete a W-9 is a non-employee who provides services to others, including sole proprietors, independent contractors, and freelancers. Form W-9 may also be used to report taxpayer IDs for:
Real estate transactionsMortgage interestBuying or abandoning secured propertyCancellation of a debtContributions to an IRA
The IRS calls the business that needs the form the “requester” because they must request that the payee (the business or person being paid) complete the form.
Who Uses Form W-9 and Why?
To know if someone must complete a Form W-9, you must first determine if they are a “U.S. person.” U.S. persons include:
U.S. citizensResident aliensPartnerships EstatesDomestic trusts
Next, you must know if the payee is an employee. W-9 forms are not used for employees; they must complete a W-4 form at hire to give their taxpayer ID number and other information for tax purposes. Non-employees, however, must complete a W-9 form. These are individuals who are in an independent trade, business, or profession who provide services to others. Examples are doctors, accountants, contractors, and subcontractors. Independent contractors are self-employed and are not considered employees, as are freelancers, They are usually paid by the job or project instead of receiving an hourly wage or a salary. The distinction between a non-employee and an employee has to do primarily with the level of control over the work being done. An independent contractor, for instance, is classified as such if the payer has the right to control or direct only the result of the work, not what or how it will be completed. If you aren’t sure if you or someone you have working for you is an employee or non-employee, see this article from the IRS on determining employee vs independent contractor status. For example, if your business hires a cleaning service or freelance web designer, you must request that the service provider complete a W-9 form. Anyone who is not an employee and provides services to a business must complete this form at hire. W-9 forms are often used to prepare several types of “1099 forms” that provide information on various types of payments to the IRS. Some common types of 1099 forms used by businesses include:
Form 1099-NEC for payments to non-employees Form 1099-DIV for dividends received Form 1099-MISC for various types of income including prizes or awards Form 1099-K merchant card and third-party network transactions
How To Fill Out Form W-9
You must complete Form W-9 as soon as you begin to be paid for services as a non-employee or in other situations when the form is requested. The form has sections for identification, for recording the taxpayer ID, and for certifying important information.
Payee Identification Information
Line 1: Name of the person (payee). If your business is a sole proprietorship or single-owner LLC, enter your name, not a business name. The name on Line 1 must match the name the IRS associates with your taxpayer ID number. For example, if you are using your Social Security number (SSN) as your taxpayer ID, your name as it appears on your Social Security card must match your name on Line 1. Line 2: Business name, if different from the personal name. This can be your business or trade name, sometimes called a “doing business as” (DBA) or fictitious name. Line 3: Type of business. Enter your business tax status. The process is pretty straightforward, except for limited liability companies (LLCs). Multiple-member (owner) LLCs are usually taxed as partnerships and single-member LLCs are usually taxed as sole proprietors. LLCs may also elect to be taxed as corporations or S corporations. The “Individual/sole proprietor or single-member LLC” designation is for sole proprietors and for single-owner businesses that haven’t registered with their state. Use this classification if you have a single-member (owner) LLC unless it’s taxed as a corporation or S corporation. If you have a multiple-member LLC or your single-member LLC is taxed as a corporation or S corporation, first check the box for limited liability company, then enter the tax classification as P for partnership (the usual designation for multiple-member LLCs, C for corporation, or S for S corporation). Line 4: Exemption codes. These are specific codes for exempt payees and exemption from backup withholding and FATCA reporting (explained below). The Form W-9 instructions include types of exemption codes.
FATCA Reporting
The Foreign Account Tax Compliance Act (FATCA) of 2010 set up requirements for taxpayers reporting foreign assets. These foreign assets don’t include U.S. investments, but they do include assets maintained at institutions outside the U.S., stocks and bonds, real property held by non-U.S. persons, and other assets. Holders of these foreign assets are subject to report the value of these assets on IRS Form 8938 if they are above a certain level. Checking the FATCA box on Form W-9 certifies that the individual is not subject to this reporting requirement.
Backup Withholding
If you hire non-employees, you need to know about backup withholding requirements. Backup withholding is not a standard action, except when the IRS requires it. If you as a requester receive a backup withholding notice from the IRS, you must immediately withhold 24% for federal income tax from payments to the payee, continuing until the IRS says you may stop this withholding. Payments to non-employees are subject to backup withholding if the payee
Doesn’t furnish a TINDoesn’t certify the TIN when requiredThe IRS says the TIN is incorrectThe IRS says the payee didn’t report interest and dividendsThe payee didn’t certify to the requester that they are not subject to backup withholding (on line 4)
Part I: Taxpayer ID Number
The payee’s taxpayer ID number must be one of these types of numbers: If you are a sole proprietor and you have an EIN, you cen enter either number. If you own a single-member LLC and it’s not taxed as a corporation or S corporation, enter your SSN as the owner, not the EIN for the LLC. Some individuals don’t have an SSN. They can use an individual taxpayer identification number (ITIN), a tax processing number for nonresident and resident aliens, their spouses, and dependents.
Part II: Certification
Form W-9 includes several statements that the payee must certify, on penalty of perjury:
That the taxpayer ID number is correct That the person is not subject to backup withholding, or that they have been notified by the IRS that they are subject to backup withholding, or that they have been notified by the IRS that they were, but are no longer, subject to backup withholdingThat they are a U.S. citizen or other U.S. person, as defined by the IRSThat they are exempt from FATCA reporting
Some types of accounts and transactions don’t require a signature on the certification or they may be modified. See the detailed instructions on Form W-9 for more details. When you have completed Form W-9, give it to the requester. Payees or requesters may not be required to submit Form W-9 to the IRS, but they must make sure the information is correct. You may be able to use a service like Adobe or DocuSign (for a fee) if your business wants to allow payees to sign the form this way. Protect the information on this form by using an encrypted email, hand delivery, or mail.
