Businesses use Form W-9, Request for Taxpayer Identification Number and Certificationto gather information about independent contractors and other vendors. The independent contractor or vendor must fill out the W-9 and submit it to the business that pays them.
Why am I being asked to complete a Form W-9?
If you do consulting or gig work for a business without being on its payroll, you will likely be asked to complete a W-9.
When a business pays more than $600 to a single taxpayer during the year, it must submit an informational return to the Internal Revenue (IRS) to disclose the payments. This form is called Form 1099-NEC. The business needs pertinent information from you to report the payments accurately, such as your name, address, Social Security number (SSN) or Employer Identification Number (EIN), and your federal tax classification.
Going forward, Form 1099-NEC will be used to report nonemployee compensation for independent contractors or freelancers. In prior years, this information was reported on Form 1099-MISC. The current Form 1099-MISC is used to report other miscellaneous payments such as:
The first line is your name as shown on your tax return. If you are an individual and report your income from the contract work on Schedule C, Profit or Loss from Business, this line is straightforward. If you are a sole proprietor or single-member limited liability company (LLC), you should enter your own name on Line 1 as well. Partnerships, multiple-member LLCs, C corporations, and S corporations should enter the entity's name as shown on the entity's tax return.
The second line is for your business's name, if any. If you are a sole proprietor or single-member LLC, you should enter your business name or “doing business as" name (dba name) on Line 2. A partnership, multiple-member LLC, C corporation, or S corporation should enter any business name, trade name, or dba on Line 2.
The third box is where you need to check the federal tax classification of the person or entity listed in Line 1. Only select one option here. If you check the LLC option, you will also need to explain the tax classification you have chosen for your LLC. The options are:
Individual/sole proprietor or single-member LLC
C corporation
S corporation
Partnership
Trust/estate
LLC
If you are exempt from backup withholding, you can enter a code in Line 4 that explains your exemption.
Line 5 is for your address. Enter your number, street, and apartment or suite number. Line 6 is your city, state, and ZIP code. This is where your 1099-NEC or 1099-MISC will be mailed. You will need to add this information to your tax return when you file your taxes.
What is the difference between a W-9 and a W-4?
Independent contractors fill out a Form W-9. However, if you are an employee of a business, you should fill out Form W-4, Employee's Withholding Certificate, instead. Businesses withhold federal and state income taxes, Social Security taxes, and Medicare taxes for their employees and pay the taxes on their behalf.
As an independent contractor, you are responsible for tracking your income and paying estimated taxes on a quarterly basis. If you are an employee, you will receive a Form W-2wage and tax statementfrom your employer at tax time. If you are an independent contractor, you will receive Form 1099-NEC from the business that pays you.
Form W-9 (or an acceptable substitute) is used by persons required to file information returns with the IRS to get the payee's (or other person's) correct name and TIN. For individuals, the TIN is generally a social security number (SSN).
to provide your correct Taxpayer Identification Number (TIN) to the person who is required to file an information return with the IRS to report, for example: Income paid to you. Real estate transactions. Mortgage interest you paid.
When do I need to request a Form W-9? As a small business owner, it is important to collect a W-9 for any person or entity you expect to pay more than $600 in a tax year. You will use the information provided to you on the W-9 to complete Form 1099-NEC, Nonemployee Compensation, or Form 1099-MISC, Miscellaneous Income.
If you don't work as an employee, you'll typically have your earnings reported on a Form 1099-NEC and will need to prepare a W-9. Form W-9 will have your personal identifiable information and states whether you're subject to backup withholding.
The W-9 is an official form furnished by the IRS for employers or other entities to verify the name, address, and tax identification number of an individual receiving income. The information taken from a W-9 form is often used to generate a 1099 tax form, which is required for income tax filing purposes.
A W-9 form is a specialized document for independent contractors, so you might not need to fill one out if the following requirements do not apply to you: Employee status: If you classify as an employee for a company and not an independent contractor or freelancer, you do not need to fill out a W-9 form.
You will need to fill out a W-9 form if you: Classify yourself as an independent contractor or “freelancer.” Are not a full-time employee of the business. Will be paid more than $600 for work provided to the business.
According to IRS regulations, businesses are generally required to collect a W9 from vendors if payments are expected to be $600 or more in a calendar year. However, if the total payments to a vendor are anticipated to be less than $600 in a given year, the IRS does not mandate the submission of a W9.
The IRS has outlined several penalties for failure to furnish or comply with the reporting requirements of Form W-9. If the taxpayer fails to furnish a correct tax number, the taxpayer is subject to a $50 fine for every instance of non-compliance with tax law and regulation.
Backup Withholding – A payee providing false or inaccurate information or refusing to grant a W-9 when requested are subject to backup withholdings on all future payments at the rate of 24% (effective 1/1/2018). Funds withheld are sent to the IRS and help the IRS identify those who don't report income.
In general, income that results from a W-9 arrangement is not subject to IRS withholding. Rather, it is the payee's responsibility to claim the income on his or her tax return and to pay any appropriate taxes.
Form W-9 is an integral part of tax compliance for any business type, and the LLC is no exception. If you are a Limited Liability Company that has hired and paid independent contractors, you can use TaxBandits' Form W-9 Manager to Request W-9 Forms online, collect them, and manage them in one place.
The main differences between W-9 and 1099 tax forms are that a W-9 is filled out by the supplier or independent contractor to provide their tax and payment information to the payer, whereas 1099 forms are provided by the payer to document the supplier or contractor's gross earnings after business has been done, which ...
A W-9 is for newly hired independent contractors and gives the business the tax information you need to file a wage statement at the end of the tax year. A W-2 is a wage and tax statement for employees that the business fills out and files with the government at the end of each tax year.
Form I-9 is a document used to verify a W-2 employee's identity and confirm their legal authorization to work in the US. Under the federal Immigration Reform and Control Act of 1986, employers cannot legally hire a W-2 employee in the US without using Form I-9.
What happens if a contractor does not provide a W9? You will still need to file a 1099-NEC but, according to the IRS, you will not be able to file electronically with incomplete information. You are required to submit the 1099 form by paper and in the box labeled TIN or Social Security number you will write “refuse.”
In general, income that results from a W-9 arrangement is not subject to IRS withholding. Rather, it is the payee's responsibility to claim the income on his or her tax return and to pay any appropriate taxes.
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