Form W-9 is a request for the name, address, and taxpayer identification number of an independent contractor who provides goods or services to a business for tax purposes.
It's a very basic form, but if you're an employer or contractor, you should understand it, so you know what you're required to do. Here is a comprehensive breakdown of Form W-9.
Definition and Example of IRS Form W-9
Form W-9 is the form used for a business to officially request and file a contractor's name, address, identification number, and business name if the contractor has one.
The form is similar to the W-4 form that an employer would ask an employee to complete. In addition to the taxpayer's identifying information, Form W-9 asks that the contractor state whether they operate as a sole proprietorship, a corporation, a partnership, or a single-member limited liability company.
Who Uses IRS Form W-9?
Independent contractors must fill out Form W-9 for the businesses they provide independent services for, because they need to receive a Form 1099-NEC from the employer at the end of the tax year. Businesses cannot issue Forms 1099-NEC unless they first obtain a completed Form W-9 containing this information.
Only independent contractors and vendors will complete Form W-9. The distinction is important: An employee is anyone whose work you or your business control. Someone who answers your telephone as a receptionist, for example, is most likely an employee if you set their hours and dictate what they should be doing while they're on the clock.
Employees don't require 1099-NEC forms. You would report their earnings and compensation on Form W-2 instead.
A hired janitor who cleans on weekends, when a business is closed and at a time that is convenient for them, is most likely an independent contractor. They would require a Form 1099-NEC at tax time. Someone you hire to create a website for your business would also most likely be an independent contractor, because you don't control when and how they work. Your business relationship consists of just one or a few isolated tasks.
As an employer, you control an employee's compensation—you determine when and whether they're entitled to a raise. A contractor, on the other hand, is essentially running their own business, and they can hike their rates whenever they like without your approval—although you're free to decline their services and use another contractor instead.
You don't have to incur payroll taxes on behalf of contractors, so many businesses consider this a better, less expensive relationship. However, you can't pay someone as an independent contractor, without incurring a tax penalty, unless the individual meets all of the legal requirements of an independent contractor and is not an employee.
You don't have to issue 1099-NEC forms to C and S-corporations or entities from whom you purchase products for resale. Payments made to contractors and vendors by debit card, credit card, or through third parties like PayPal are also exempt because the IRS uses a different method to track these transactions. They're reported on Form 1099-K.
Where To Get IRS Form W-9
Once complete, W-9 forms should be sent directly to the employer. If you're the employer, encourage contractors to complete and send their Forms W-9 securely, because it will contain sensitive information. This data should be kept as private and secure as possible to minimize the risk of having it fall into the wrong hands.
Transmitting a completed Form W-9 as an insecure file attachment to an email is not recommended. Instead, ask to receive it by mail or hand delivery, or as a password-protected file attachment.
What to Do if You Don't Receive IRS Form W-9
It's a good practice to request that independent contractors provide you with a completed Form W-9 as soon as you know that you'll be doing business together. It's too easy to let these requests slide until January, when you'll need them.
You might not want to do business with someone who doesn't want to give you a Form W-9. That should be a red flag, because you could be held liable for penalties if they're subject to backup withholding and you don't know it. The form also asks for this information.
To save time and effort, download a supply of blank W-9 forms so you can hand them out as necessary when you contract anyone for services.
Requirements for Filing Form W-9
The instructions for Forms 1099-MISC and 1099-NEC from the Internal Revenue Service (IRS) explain the various situations and finer details that require businesses to issue these forms. You must complete, file, and issue them to all contractors to whom you've paid $600 or more during the tax year.
- IRS Form W-9 is most commonly completed by independent contractors, and it is used to request their tax-filing name and Taxpayer Identification Number, or TIN.
- The form is submitted to an employer or business, not the IRS.
- Businesses use the information provided on Form W-9 to prepare and issue Forms 1099-NEC after the tax year, detailing what each contractor was paid.
- You must issue Forms 1099-NEC to contractors to whom you've paid $600 or more during the tax year, so you'll need Forms W-9 from those individuals.