The W-9 Form or Request for Taxpayer Identification Number and Accreditation form, offers a company with appropriate individual details about a freelancer or an independent contractor (IC) for tax purpose in the United States. The Form requests details such as the IC’s name, address, social security number (SSN), and more. The information is use to create a 1099-MISC. A W-9 Form is a vital tool for companies to collect info about the worker for earnings tax needs. Confirming the details on this Form and keeping it updated guarantees you gathered precise individual details.
Typically, the IRS Form W-9 and the Tax Identification Number and Certification are a requirement by employers. They’re detailed to provide necessary information for businesses relating to their independent contractors. A company must report payments made to a contractor, either adding up to $600 or more, within a tax year. Such information is reported to the Internal Revenue Service (IRS). An information return called FORM 1099-MISC is used. To complete the information, businesses pick the name, address, tax identification number, or the contractors’ Social Security number. Senders and recipients don’t need to send a copy to the IRS.
Unlike what they do for their employees, businesses handle independent contractors differently. Their income taxes are not withheld, and contractors are entitled to pay for their Social Security taxes or Medicare. These responsibilities aren’t the employer’s responsibility. Whatever the case, the IRS needs to know the exact amount these contractors pocketed to ensure they pay the taxes they deserve to. The 1099-MISC is a vital resource here. It’s used to gather this information. So businesses needn’t send anything to the IRS, not even the Form W-9.
The information that required to be on Form W-9
Let’s cut to the chase. Here’s the information needed in the Form W-9: The contractor’s name, name of the business (if it differs), business entity ( whether a sole proprietorship or partnership, S corporation, C corporation, limited liability company, trust/estate, and much more), and finally the business’ tax identification number ( or could be Social Security number, for sole proprietors using the same tax ID number).
Certification of not being subject to backup withholding is also a must for anyone filling the Form W-9. Though most taxpayers are not, those contractors get their income tax withheld by their hiring companies. It’s done at a flat rate of 24% ( for the tax years 2018-2025) and later forwarded to the IRS.
With identity theft being a rampant vice, the person filing the Form W-9 and the company receiving it need to ensure the completed form is heavily secured. Remember, the form has the tax ID or Social Security number on it, so everything is possible.
When is it Inappropriate to Fill Out Form W-9
The unexpected arrival of a W-9 form for filling should be handled seriously by an independent contractor. Before accepting it, the contractor should know whether he/she is legitimately required to do so. Form W-9 is sometimes also used by financial institutions to source information from a customer to report dividends or interest. A caution here: It’s likely the financial institution already has your tax ID number obtained when you opened your account.
Next, if the company asking for your Form W-9 is your employer and classifies you as an employee rather than an independent contractor, then there’s a reason to worry. The difference is considerable.
What’s in there – employee or independent contractor?
As an employee, your employer withholds your income taxes, withholds and pays Medicare and Social Security taxes, and has to pay unemployment tax on your wages. If you’re an independent contractor, all this is different. Social Security and Medicare taxes are your responsibility. And in case you’re laid off, you’ll receive no unemployment compensation.
At times, unethical or employees suffering financially may try to classify an employee as an independent contractor for the sole purpose of saving money. Assuming this happens, your employer’s “savings” from tax come out of your pocket as self-employment tax. Calculating and paying your estimated tax returns, done four times a year, now becomes your responsibility. Plus, you’ll have to fill out Schedule C once you file your annual tax return.
Sometimes it’s unclear whether a worker is an independent contractor or an employee. Though generally, when a business has immense control over what workers do and how they do it, then the chances are, they’re employees. When someone who hired you labels you an independent contractor, that’s a great sign, so investigate further. Begin by reviewing the IRS for a point on the difference between the two. If you’re an employee, fill out Form W-4 instead of Form W-9.
Sometimes it’s legitimate for your employer to change your status from employee to independent contractor. Let’ find out when Shall we? If you work as a computer programmer and be in the workplace from 9 a.m to 6 p.m, from Monday to Friday. And the company provides you with a desk and a computer.
A time may come when you’ve to provide your computer. You can work from home or any remote location you feel like working from. Complete the assigned work during the time you want to be provided; you complete them on schedule and respond to work-related emails and call on time. That’s when your status could change.
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