The IRS requires businesses to provide information about contractors and freelancers that they use. This information includes the freelancer’s or contractor’s taxpayer identification number, name and address.
This information is submitted via a W-9 form, and is used by the business to prepare a 1099-MISC form to report to the IRS the income that the contractor or freelancer has received.
From the vendor’s perspective, the W-9 form acts as an agreement that they are responsible for paying their own income tax, Medicare and Social Security liabilities.
Who Fills Out a W-9 Form?
If you are a self-employed worker – a freelancer, contractor, consultant or vendor, for example – you will be required to complete a W-9 form. And if you have provided your services to more than one business, you’ll need to fill out separate forms for each of them.
The W-9 form is also required to report any income derived from mortgage interest paid by individuals, some real estate transactions, and shareholder dividends.
As of the tax year 2018, only payments over $600 need to be recorded on a 1099 form, although any income under $600 still needs to be reported on a person’s annual tax return form.
What is the Purpose of a W-9 Form?
The two main purposes of a W-9 form are to verify that the taxpayer is responsible for their own taxes, and to provide information required when reporting a contractor’s tax obligations.
How to Complete a W-9 Form
- In the box marked “Name”, enter your name or business name, exactly as it appears on your tax returns.
- If applicable (if you do not file taxes as an LLC, partnership or corporation) mark the box for “Individual/Sole proprietor”.
- If you are absolutely certain that you are exempt from backup withholding, check the box marked “Exempt payee”.
- Add your address.
Add your taxpayer identification number (TIN). This is your Social Security number.
- Finally, sign and date the form and return it to the business who issued it to you. You must not send the W-9 to the IRS.
Do LLC’s Complete W-9 Forms?
Yes, an LLC must also complete a W-9. There are slightly different ways of completing the form depending on whether the LLC is “single member”, or a corporation/partnership.
For single member LLC’s:
- As single member LLC’s are listed as “disregarded entities” by the IRS, you will complete the W-9 form following the steps detailed above.
- In the “Name” field, enter both your name and the legal name of your LLC. The name you use to file your tax returns should be entered on the first line.
- It is important that you check the “Individual/Sole proprietor/single member LLC” box and not the “limited liability company” box.
- Under “Social Security Number” you should ideally enter your SSN. If applicable, the IRS will allow you to use your employee identification number (EIN).
- Sign, date and return the W-9 form to the business you have provided services to.
For corporations and partnerships:
- Enter the name of your LLC as it is recorded on your tax documents. If you use a secondary business name, it can be entered on the second line, marked “Business Name”.
- Check the box marked “Limited Liability Company”.
- The tax classification line requires you to use a code. “P” represents a partnership, “S” signifies S Corporation, and “C” is for corporation.
- After your address, add your employee ID number of the LLC.
- Sign, date and return the W-9 form to the business you have provided services to.
Remember, you must complete a W-9 form for each business you work for. It is highly advisable to keep your own copy of each W-9 for your tax records.
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