The IRS Form W9 (Request for Taxpayer Identification Number and Certification) is used by organizations in order to to get data from people they employ on a self-employment basis.
Why You Need to Fill in Form W9
When a business pays a freelancer $600 or more on a yearly basis, this expense must be reported into the Internal Revenue Service (IRS) by means of a different document – Form 1099-MISC.
Your company will take the information you submitted in IRS Form W9 and use it in order to complete Form 1099-MISC. That is why it is strictly important to verify the correctness of your data while doing the W9 form.
The data taken from your completed IRS Form W9 might include:
- your full name;
- name of your business (if any);
- your permanent address.
You may be asked to fill in US Form W9 in other situations:
- when you pay a mortgage interest;
- in case of any debt or cancellation;
- when you participate in real estate transactions;
- in the events related to secured properties (abandonment or acquisition);
- certain real estate transactions;
- mortgage interest paid;
- if you contribute to IRA (individual retirement arrangement).
The detailed instructions on how to complete the form efficiently can be found HERE.
IRS Form W9 is a very easy one to complete. Even if you don’t feel keen at completing forms, especially those where you need to supply very important and detailed information, this article will provide as much help as possible to guide you through the whole process.
! Please note that you must be a U.S. citizen in order to submit Form W9.
Step-by-step tutorial on how to complete Form W9
- Enter your full name as stated in the tax return document.
- Enter the business name if you have it different from your full name. For example, if you are a freelancer, you might be doing business under your own name or use a specific name (in case you don’t want your personal data to be shown publicly).
- Choose the type of your business. Here are a few examples: sole proprietorship, partnership, C or S corporation, trust/estate, limited liability company. Most independent freelancers are classified as sole proprietorship.
- Exemptions. This field should be left blank if you are a freelancer as you are not qualified for exemptions.
- Some personal data are needed at this step such as street address, city, state, and zip code. It is advisable to put the same information you usually put in the tax return document.
- At this point, you might leave the information about requester’s name and address but it is optional.
- Independent freelancers must provide their tax identification number which in most cases will be their Social Security Number (SSN) or (sometimes) Employer Identification Number (EIN).
- At the final stage, you will be asked to state that the information you provided is true and to sign the form.
That is how you can easily finalize IRS Form W9 completion in a few simple steps.
When You Don’t Need to Submit W9
If you are an independent freelancer and you suddenly get the IRS Form W9 pending to be completed, you should, first of all, inquire about the requester and his legitimate reasons to send you this form.
Financial organizations like banks may request you the information and ask for IRS Form W9 completion. However, they already have all the necessary information about you since you created your account. There’s no reason to provide an additional form in this case.
If you are working in a company as an employee and suddenly you get the request to fill in IRS Form W9, you should not do that. It is important to contact your company and to check your current status as an employee.
The difference between being an independent contractor and an employee is very important.
Freelancer vs Employee
- If you are a dependent contractor (employee), the company you work for will pay unemployment taxes and withholds income taxes for you;
- If you are a freelancer, you manage everything yourself and you can’t have the unemployment compensation.