Form W-9: What is it for and how to fill it out step by step

Not all United States citizens are required to fill out a Form W-9 to file with the IRS. So who should use it? Independent contractors, consultants or any other self-employed worker; a group that does not represent the majority of people.

However, if you are part of this sector and you expect to receive financial compensation of more than $ 600 a year from one of your clients, it may ask you for a Form W-9. Remember that the company you provide your services to will continue or occasionally use this form to prepare Form 1099-MISC that will serve you to declare your income taxes.

Here you will detail the amount of income you received in the year so that the Internal Revenue Service can calculate how much do you have to pay for federal taxes.

What is the W-9 form?

Sheet W-9 -also known as Form W-9- is an Internal Revenue Service (IRS or Internal Revenue Service) form that is reserved for those who are self-employed, such as independent contractors. However, you will not always have to fill out a W-9 Sheet for your clients. For this to happen, the amount you expect to receive from this company for the provision of services must exceed $ 600 per year.

Now, there are other situations where you might need a W-9 that have nothing to do with your clientele. Think that it is possible that banks and other financial institutions They could ask you for a Form W-9 to inform the IRS about the amount of money you have received in interest or dividends. It could also happen that a bank asks you for an IRS Sheet W-9 when opening your bank account.

If you buy or rent an apartment, you may also need to submit a Form W-9 to complete the operation. The same will happen if you request a loan from the bank and even a credit card.

How to obtain the W-9 form

Obtaining a W-9 is not difficult at all. In most cases, the company you provide your services to or the financial institution you have chosen to open your account or apply for the loan provide you with a blank IRS Form W-9 so you can complete it with your information.

Tip: Are you a company and you want to know how to get a W-9 for your independent contractors? Download it directly from the official IRS website!

DOWNLOAD THE W-9 FORM HERE

How to fill out the W-9 form?

Filling out Form W-9 is pretty easy to do. However, if in doubt, check out our step-by-step guide and avoid any mistakes:

  1. The first thing you should do is write your full name as it appears on your tax return in box 1.
  2. In the first part, you will also find a line to write your social security number. Remember that both your name and social security number (SSN or Social Security Number) must match the information you have on file with the IRS for your tax return.
  3. On lines 5 and 6, indicate your address. This address must be the same as the one reflected on your tax return.
  4. Don’t forget to include your employer’s identification number as well. You will get this box in Part 1 of the form.

Note: If you represent a company, you must write its legal name in box number 2.

What should you take into account when filling out your Form W-9?

Although Form W-9 is a standard tax document and shouldn’t get you as much trouble, there are a few things to keep in mind:

# 1 Do not submit a W-9 if you are a dependent worker

If you’re starting a new company as a dependent worker and your employer gives you a blank Form W-9, wait! Before filling it out, ask him if you will work as an independent contractor, that is, as a self-employed person or, on the contrary, you are an employee. Why? Because dependent workers must submit a Form W-4 and not a W-9.

While self-employed workers are required to report their tax payments, If you are a dependent employee, it is your employer who must deduct taxes from your monthly pay and report it to the IRS. If you do not know what type of worker you are, do not stop reading the section “how to know if I am a formal employee”Of our article.

# 2 Make sure you submit Form W-9 safely

As a recommendation, do not send your Form W-9 as an attachment, by WhatsApp or any other messaging application! Remember that this sheet contains sensitive personal information, such as your SSN and address. If you are going to send it by email, make sure to send it through one that is encrypted. Our recommendation? If possible, opt for other delivery methods, such as in-person consignment.

# 3 Verify the applicant’s reason before submitting a Form W-9

Who can ask you for a Form W-9? As we indicated above, your clients (as long as you earn more than $ 600 annually with them), the bank or a credit union, a lender, etc. If you are not sure why they are requesting a Form W-9, ask why! Remember that this form contains confidential information that, if it falls into the wrong hands, could wreak havoc on your finances.

# 4 Do not give a Form W-9 to a company or person you do not know

You should always exercise caution before handing over a document that contains confidential information, such as your full name, address, and your SSN.. If you don’t know the company that is requesting the form, don’t hand it in! Remember that this form from the IRS is reserved for your clients and that you should only consign it in the event that you provide one or more services whose unit or global amount exceeds $ 600 per year.

How to fill out Form W-9 if you are a limited liability company?

If you represent a limited liability company (LLC) which, as you may know, is a separate tax entity (C Corporation or S coport) use the name and identification number of your company to fill out Form W-9. Check the box corresponding to the tax classification on line 3 and indicate if you represent a C or S corporation. Remember: don’t check the LLC box. Although it sounds counterintuitive, it is a mistake as posted on the IRS page.

However, If the LLC is owned by another LLC, check the box for the limited liability company. You will also need to indicate the tax classification of the primary LLC. If the LLC is owned by a single member, indicate what is the tax classification of the owner, and if that member is a natural person, write the name of the owner of the box on line 1 “name” and the name of the LLC in the “trade name” box.

Note. If you are hired by an LLC, the IRS prefers that you write the owner’s SSN rather than the limited liability company.

What to do with your W-9 if you are subject to a backup withholding?

Backup withholding is an additional retention rate of 24% on payments you receive personally or for your work. There are two reasons that could warrant that you are subject to this additional withholding: your name and SSN do not match those registered with the IRS or if you have outstanding tax debts and the IRS has notified you that you are subject to this mandatory withholding until the amount of your debt is paid in full.

Most taxpayers are exempt from the backup withholding. That is why they should check the box that appears on line 2 of part 2. This section says something similar to the following:

“I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) the Internal Revenue Service (IRS) has not notified me that I am subject to backup withholding as a result of not informing you on all my interest or dividends, or (c) the IRS has notified me that I am no longer subject to this backup withholding. “

Real estate transactions are not subject to a backup withholding, so you can also cross this box if you are completing Form W-9 for this purpose.

Most corporations are also exempt from the backup withholdings, but they may need to include a special exemption code in the “exempt beneficiary code” box on line 4. The same would apply if you are exempt from providing information according to the Foreign Account Tax Compliance Act (FATCA). In this case, you must write the exemption code from the FATCA report in that same box.

Frequently asked questions and answers about Form W-9

If you have questions about the IRS Form W-9, be sure to see our frequently asked questions section, since here you could find the answer that you are looking for so much:

How Often Should I Update Form W-9?

You will need to update your Form W-9 every time there are changes to your information, such as your name, business name, address, Social Security number, or your employer’s identification number.

I received a Form W-9 by mistake. That I have to do?

It is not common, but it can happen that you receive a Form W-9 by mistake. This form is used to officially ask a person or company to provide their legal name, address and SSN so that we can issue you the corresponding tax documents according to the IRS. In general, any company that pays you interest, dividends, economic compensation or any other type of income that must be declared, will give you a Form W-9 to fill out and submit.

If you receive a Formula W-9 from the IRS from a strange source, meaning that they will not pay you an amount of money for any of the reasons listed in this article, ask them their reasons because it may not be necessary.

Warning. Do not complete or submit Form W-9 if you have questions. If you want to shed more light on the matter, contact an accountant or tax specialist.

I received a W-9 from my employer, what do I do?

If you are or were working as a dependent employee, you receive a regular paycheck and your employer suddenly asks you to fill out a Form W-9, may want to treat you like an independent contractor. This could be quite an awkward situation for you, and we’ll see why right away.

Consider that there are legitimate reasons why you could go from being an employee to an independent contractor. For example, employers may sometimes be facing a difficult financial situation that prevents them from paying wages and salaries. payroll taxes. Reclassifying yourself as an independent contractor would offer them an easy way out, as they won’t have to pay those taxes.

In cases like these, ask yourself if your duties and dependency change with reclassification as well. If they continue to treat you as an employee, it would be unfair to accept that the employer determines that you are an independent contractor before the IRS. Maybe if your employer keeps demanding that you stick to a schedule, for example, you should politely ask them to consider you as an employee and not as an independent contractor.

Remember: If your employer classifies you as an independent contractor, you will have to pay half of your payroll taxes and an additional self-employment tax.

You can usually determine if you are an employee or an independent contractor by looking at certain factors. If your employer decides how, when and where you will work, the amount of your pay, the form of payment and provides you with certain benefits (such as bonuses or vacations) you are an employee and should not fill out a Form W-9.

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