Form W-9 is used when a business needs to have your name, address and taxpayer identification number so the business can issue a tax document to you and to the IRS. Form W-9 is frequently utilized in a business context, when one business needs to pay another business or a person for worked performed as an independent contractor. Form W-9 is also used by financial institutions to obtain information from their customers which will be used to prepare various types of Form 1099 to report interest, dividends and other types of income.
Independent contractors and other people who work for themselves will often need to give a Form W-9 to their clients. Clients will then use the information on Form W-9 to prepare Form 1099-MISC to report income paid to the independent contractor.
As far as tax forms go, Form W-9 is pretty straightforward. You provide your name, address and Social Security Number. For contractors who have a separate business entity, they provide the name, address and Employer Identification Number of their business.
The W-9 form also asks whether you are subject to backup withholding. This is withholding at a flat rate of 28% on payments made to you or your business under certain circumstances. There are two common reasons for backup withholding: your name and SSN as provided on Form W-9 don't match the IRS' records, or you have outstanding tax debts and the IRS has notified you that you are subject to mandatory backup withholding until the taxes are paid in full.
Contractors might receive requests to fill out W-9 forms at the end or at the beginning of the year as clients get ready to mail out their 1099-MISC forms to report self-employment income. Brokers and financial institutions might also ask for a W-9 form if you'll be earning interest income, dividends, or trading stocks and other securities.
Update: Answers to Some Commonly Asked Questions about Form W-9
From the comments below, here are answers to some of the most frequently asked questions.
How often do I send out or update a Form W-9?
People should send out a new Form W-9 whenever the information on Form W-9 changes. Send out a new W-9 if your name, business name, address, Social Security Number or Employer Identification Number has changed.
How often should I request W-9s from my subcontractors?
Generally I advise my clients to request a W-9 at the time you contract with an independent contractor to provide services. At the very least, obtain a signed W-9 prior to paying out more than $600 during the course of the calendar year. You can request an updated W-9 at any time, but there's no set requirement to do so.
I received a W-9 from an unlikely source. What should I do?
Some people have received a request for Form W-9 from landlords and other people or businesses. Form W-9 is used to officially ask a person or business to provide their name, address, and taxpayer identification number so that the requesting party can properly issue tax documents to the IRS. In general, the types of businesses that request Form W-9 is any business that pays you interest, dividends, non-employee compensation, and certain other types of reportable income. If you receive a W-9 from an unlikely source, ask why they need the W-9 form and how it will be used.
I need to issue a 1099 to a foreign subcontractor. Do I still send out a W-9 Form?
No. Form W-9 is used to gather information only from US persons and businesses. If you have a foreign contractor working for you, that person will need to fill out one of the several Form W-8 documents. Forms in the W-8 series are designed to indicate how much, if any, of payments made to a foreign person or business should be withheld for US income taxes. For an overview of these issues, see FAQ for US Withholding Agents on the IRS Web site.
I received a W-9 from my employer, what should I do?
If you are, or were, being treated as an employee (with a regular paycheck), and your employer suddenly asks you to fill out a Form W-9, this could indicate that your employer now wants to treat you as an independent contractor. This is a rather sticky situation: on the one hand, there are sometimes legitimate reasons why you might be an independent contractor rather than an employee. On the other hand, sometimes employers start to run into financial difficulties and they can no longer afford to pay their half of the payroll taxes. If you get a W-9 from your employer, and you should first ask yourself whether you are an employee or an independent contractor. Ask your employer for clarification. And if you cannot reach consensus after talking with your employer, you can ask the IRS to get involved to make a determination of your work status. For more details see Independent Contractor or Employee? on the IRS Web site.
- What to do if you get a Form W-9 to fill out
- What is Backup Withholding and who's exempt?
- Tax tips for freelancers and independent contractors
Links to IRS Forms and Instructions:
- Form W-9 including Instructions (pdf, 4 pages)
- Instructions for the Requester of Form W-9 (pdf, 4 pages, these are the instructions for businesses that send out W-9 forms for other people to fill out)
Have a question about Form W-9? Leave a comment below.