As a freelancer or independent contractor, you're likely to be asked by most of your clients to fill Form W-9, Request for Taxpayer Identification Number (TIN) and Certification. This important document enables businesses to collate essential information from their vendors, as required for filing information returns with the IRS.
In scenarios where a business compensates a freelancer or independent contractor a total of $600 or more during the year, it uses Form 1099-MISC for information returns. Your client uses the details on your W-9 form to include your name, address, business name, and TIN on the 1099-MISC they file about you. By the latter half of January, following the close of the tax year, they send a copy of this form to the IRS and another to you.
Among the various reasons why you might be asked to fill out a W-9 include tax information collection from U.S. persons, including resident aliens, or from partnerships, corporations, companies, estates, and domestic trusts. Even though Form W-9 is one of the simplest IRS forms to complete, if you're uneasy about tax forms, don't worry. Here's a comprehensive guide on how to fill it out:
Step 1: Enter the name you use on your tax return. Step 2: Enter your business name or "disregarded entity" name, if it differs from the name you entered for step 1. If you're a "doing business as" entity, provide that name. Step 3: Declare the type of your business entity.
The subsequent steps involve providing your address and tax identification numbers. All the information required is straightforward and, for the most part, isn't tricky to complete, even for a new business that doesn't yet have an EIN number.
In the final stages, you confirm the truthfulness of the information you've given and sign the form. As the IRS doesn't joke around, be sure to certify that your information is correct under penalty of perjury. The final step is to return your filled form to the requesting business, ensuring you take critical safeguards against identity theft when doing so.
The IRS allows taxpayers to use a substitute Form W-9 that aligns with particular certification requirements and is largely similar to the IRS Form W-9. This form's certifications need to clearly affirm that all of the information included is correct under penalties of perjury.
Form W-9 exists to collect information from a taxpayer, which is then used to forward relevant tax forms. One such form could be a Form 1099, sent to report payment to a contractor or another individual paid for various reasons. In cases where you don't feel comfortable giving your sensitive information to unknown parties, you can refuse to fill out a Form W-9. However, do remember that companies often increase tax withholding if you don't provide tax information, as a conservative measure in line with IRS regulation.
The Form W-9 is essential in ensuring accurate tax return reporting. If uncertain about some aspects of the form, such as your business classification, always consult your accountant or another financial advisor to prevent mistakes.