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When you began working for yourself, you probably didn’t account for the tax reporting work that will fall on your shoulders each year. If you’re a freelancer, independent contractor, or business owner, filing your taxes is not as simple as uploading your W-2 form into some online tax preparation software. Most self-employed people need to complete a W-9 as a step for accurately reporting their earnings to the IRS. Below, you can learn how to fill out a W-9 and when to submit it.
If you do business with a company that pays you as an independent contractor, freelancer, or gig worker — in other words, you’re self-employed — the company may have you fill out a W-9. For example, a freelance graphic designer may need to complete a W-9 when they begin working with a new client on a long-term branding project.
Form W-9 is the paperwork the IRS uses to help companies prepare 1099 forms for their workers (you need both the W-9 and 1099 to file your taxes as a business owner). The form’s official title is “Request for Taxpayer Identification Number and Certification.” When a company requests this form from you, it means they need your Taxpayer Identification Number (TIN) and other personal identification information like your name and address to help them report the payments they make to you and determine whether you are subject to backup withholding.
What is a W-9 Used for?
When you fill out this form, you agree that you are responsible for withholding taxes from your income as a contractor or self-employed person. This agreement does not apply when you’re a full-time employee, in which case your employer withholds some of your income to cover federal income taxes and Medicare and Social Security taxes (also known as payroll taxes). At the end of the tax year, your clients will use the information on your W-9 to complete a 1099-MISC — the form that outlines all payments made to you.
Who Has to Fill Out a W-9
If you’re a self-employed worker, like an independent contractor, freelancer, or consultant that provides services for a company that pays you more than $600 a year, you’ll fill out and submit a W-9.
You’re considered an independent contractor if you fall under one of the following titles:
- Graphic Designer
- Private investigators, and more
Who Asks for a Completed W-9
Most commonly, any new business, in which you provide paid services, will ask for a completed W-9. Usually, your new client will send you a blank W-9 form to complete before you begin any work with them.
Outside of employment scenarios, several other instances require a completed W-9, such as::
- Banks, when you open a new account with them
- If someone forgives or cancels a debt you owe them
- During some real estate deals
- If you pay interest on your mortgage
- If you contribute to an individual retirement arrangement (IRA)
If anyone other than a client, bank, or other financial institution asks you to submit a W-9 form, think twice before abiding by their request. This form requires you to provide sensitive information, which can lead to identity theft if placed in the wrong hands.
Regular employers shouldn’t ask you for a W-9 either. If you’re a standard employee (rather than an independent contractor), you’ll need a W-4 form. Then, standard employees will file a W-2 based on the income they earned via their pay stubs for the year prior.
How are W-9 and W-4 Different
Whether you’re handed a W-9 or W-4 form during onboarding will depend on your job status and title.
Form W-4 is for traditional employees, and Form W-9 is for vendors and independent contractors who receive non-employee compensation from a company. Employees fill out Form W-4 to set their tax withholding level. On the other hand, self-employed persons don’t have income taxes or Social Security or Medicare taxes withheld, so they’ll use the W-9 for informational purposes and their own records.
To simplify things even further: if you’re starting a job as a new employee, you must fill out a W-4 form. If you’re onboarding as an independent contractor, you must complete a W-9 form.
How to Fill Out a W-9
There are seven sections you must complete on a W-9 form. To ensure you provide the most accurate information, you should read each section carefully and proofread your entries. You can download a W-9 form from the IRS website.
To complete Form W-9, you’ll need to provide information for the following lines and parts:
Line 1 – Name
Type your full name in this section, ensuring that it matches the name shown on your tax returns.
Line 2 – Business Name
Enter your business name or disregarded entity name. If you do not have a business, leave this line blank.
Line 3 – Federal Tax Classification
Check the appropriate box, noting which type of business entity you are for federal tax classification purposes. For example, you might check:
- Sole proprietorship or single-member Limited Liability Company (LLC), the most common option for independent contractors
- C corporation
- S corporation
- Trust or estate
If you operate a sole proprietor business or single-member LLC, it means you file under your own Social Security number, and the number has not been registered as another type of business. Check the Limited Liability Company box if you have a Partnership or LLC business with multiple members. If your LLC is not taxed as a C or S corporation, it is taxed as a Partnership.
Categorizing your business can get tricky, so if you need help determining which box to check or how to operate your business properly, consult a tax advisor for help completing this form.
Line 4 – Exemptions
You’ll enter any applicable exemptions here. Most individuals aren’t eligible for exemptions, only certain businesses and entities. Read the section “Specific Instructions, Exempt Payee” on page three of the form for situations that would make you exempt.
For example, some corporations are exempt from backup withholding and will enter a code in the “Exempt payee code” box. Others are exempt from reporting under the Foreign Account Tax Compliance Act (FATCA), but again, this rarely applies to the typical independent contractor or freelancer.
Line 5 and Line 6 – Address
On line 5, type the address (number, street, and apartment or suite number) you use on your tax return. On line 6, enter the city, state, and ZIP code of this address.
Line 7 – Account Numbers
You have two options to type your taxpayer identification number (TIN). Depending on your situation, this is either your employer identification number (EIN) or social security number.
Part I – Taxpayer Identification Number (TIN)
As an individual or single-member LLC, your TIN is usually your Social Security Number. It can also include your employer identification number (EIN) if you are a multi-member LLC, partnership, C Corporation, or S Corporation. If you’re a sole proprietor, you can type either number.
If you live in the United States as a resident alien, use your IRS ITIN in place of a social security number.
Part II – Certification
Finally, you’ll sign and date the form, confirming the information you’ve entered is accurate to the best of your knowledge. If you are subject to backup withholding for failing to report all interest and dividends on your tax return, cross out line 2.
Best Practices When It Comes to Filling One
Completing a tax form isn’t something to multitask alongside a TV binge session or in a time crunch. These documents carry legal repercussions if not filed properly. Plus, you want to ensure you get paid for your awesome work as a self-employed person. Submitting a correct W-9 on time helps ensure you do just that.
- Confirm you should fill out a W-9 in the first place: You should only fill out tax form W-9 if you are self-employed as an independent contractor, consultant, or similar. Regular new employees hired by a company will need a W-4 to set up their tax withholdings.
- Read all instructions carefully: Though the form comes with instructions, the information is clouded with tax jargon applicable to certain businesses and entities. As you move through the document, read all the instructions closely to make sure you’re recording your responses properly.
- Consult a tax pro: If sections of the W-9 form confuse you (we get it; the information gets pretty dense) consider consulting with a tax or legal professional with knowledge of tax law and regulations to ensure you fill the form out correctly. A financial expert can also help you set up (categorize) your business appropriately depending on your business size, the services you offer, and more.
- Proofread your entries: Always, always, always read through the W-9 a few times to check your spelling and confirm the accuracy of your data. You and your client must report the right information to the IRS to avoid penalties. More on this later.
- Submit (or return) it carefully: Return your completed W-9 form to the business that asked you to fill it out. Best case scenario, your client shares and collects these forms via an encrypted file-sharing service. But if email is the only way to return the document, encrypt both the PDF document and your email message (you can do this via several free services online) and double-check the recipient’s email address before sending your message.
How to Fill Out a W-9 for an LLC
Single-member LLCs operate in the same way sole proprietors do, so in these instances, you’ll fill out the W-9 as outlined above — just remember to check the “Individual/sole proprietor/single-member LLC” box, not the “limited liability company” box, for your tax classification on line 3.
If the LLC is a corporation or partnership, it must complete a W-9 form with the following adjustments:
- Enter the name of the LLC as recorded in your tax documents. If the LLC is owned by an individual and not another entity, then the individual’s name goes on the “name” line, and the LLC name goes on the “business name line.” If the LLC has a secondary business name, enter it on the second line, “Business Name” on line 2.
- Check the “Limited Liability Company” box
- Certify your entity as a partnership, S Corporation, or C corporation on the tax classification line 3
- Enter the business address, city, state, and zip code on lines 5 and 6
- Enter the LLCs employer ID number
- Sign and date the W-9 and submit it to the requester
How to Fill Out a W-9 for Non-profits
If you own a nonprofit and get paid by someone else, say, for consulting services, the client will request a W-9 from your organization. You must also send a W-9 if you pay someone else through your company more than $600, so you can successfully document the income paid on a form 1099-MISC later.
To ensure you fill out a W-9 correctly as a nonprofit, follow these steps:
- Type your nonprofit corporation name
- Enter your business name if it differs from your corporation name
- Check the “C Corporation” box, or opt for “other” and type “nonprofit corporation” in the provided line
- Type your exempt payee code. If your corporation is exempt from tax under IRS code 501(a), you are also exempt from backup withholding. Enter a 1 per the W-9 instructions.
- Add your organization’s mailing address in address lines 1 and 2
- Mark your Employer Identification Number (EIN)
- Sign the form to certify the information
- Submit the form
How and When to Submit a W-9
As an independent contractor, your client must file the W-9 you submitted prior to working with them by the 1099-MISC filing deadline: Jan. 31 of the year following payment. For example, if a client paid you on Sept. 29, 2022, you must send the client your W-9 form well in advance of Jan. 31, 2023, in order to meet the deadline for submitting 1099 forms. (Remember, this deadline only applies if the client hasn’t already sent one to you during onboarding.) If you paid someone else through your business, you must also meet these deadlines for submitting a W-9.
When sharing your form with business owners and clients, the best way to submit a W-9 is via PDF in an encrypted email to protect your sensitive information or via an encrypted file-sharing service.
Penalties for Non-Compliant Form W-9
It’s very important to avoid mistakes when completing any IRS tax form. Entering false information on a W-9 for the tax year 2022 will result in a $50 fine for every erroneous form submitted under the information return penalty. Examples of penalty-eligible mistakes include submitting the form with a small typo or providing the wrong tax identification number. You must correct the mistake within 30 days; otherwise, your penalty will spike to $110. If you don’t correct your information by August 1 of the tax year, your penalty can reach as high as $570. These penalty amounts are also slated to increase for tax years 2023 and 2024.
If you make a false statement that results in no backup withholding, you are subject to a penalty of up to $500. With repeated non-compliance, you can be subject to criminal penalties, fines, or imprisonment.
The requester of the taxpayer information (your client or company) is also at risk of civil or criminal penalty if they disclose or use your TINs in violation of federal law.
If filling out W-9’s are part of your tax preparation work, it’s worth learning how and when to file these vital documents. Think of the W-9 as a precursor to 1099, which is the document you’ll upload when filing your taxes. If you’re ever unsure whether you need to file a W-9 with a new client, just ask. Most companies are more than happy to answer these questions because it ensures you are both prepared to report your income to the IRS accurately.