I’ve requested and reviewed thousands of W9 over the course of my career. It is a relatively simple form (much simpler than the W4 – which sometimes gets mistaken for the W9). You do not have to scribble through a worksheet to figure out what to put on it. But you do need to understand what is being asked and why.
What It Is
The W9 is simply a request for a Taxpayer Identification Number, or a ‘TIN’. A TIN can be either a Social Security number (SS#) or an Employer Identification number. If you do not have either of these because, let’s say you are not a United States person/entity who is already setup with one of these, you would complete on of the many versions of the W8 (and you have my condolences….on needing to fill out a W8; not on not being a United States citizen/entity 🙂 )
If you are issuing payments to someone for a service or work, then you would have them complete the W9 form. Why do you need this? Well, because the IRS needs your payment information so that they can keep an accurate tab on the income of the person that you paid. You do this by producing a 1099 form (not going down the 1099 rabbit hole here; but that would be a great post for the future!)
What About Those Other Ws?
Ah, you mean the W4 and the W2? Those are for your actual employees….not contractors. This is why a W4 is more complicated to complete — because that document determines the amount of federal tax withholding that an employer must utilize in payroll. The W2 is the annual report that is provided to the employees/IRS from the employer to anyone who remitted a W4 that was paid wages.
Why Do I Need It?
If you are a business, and you need to pay someone (an individual or a business) for a service, then you need to get a W9. Here are some examples to illustrate:
#1 – If Yummy Cookie Company hires a landscaper to mow their grass, then they would request that the landscaper fill out a W9. However, that same landscaper can mow the grass at your grandmother’s home, and she doesn’t need to request a W9
#2 – If Yummy Cookie Company decides to fire the landscaper, and instead utilize a landscaping company to mow their grass, then they don’t have to request a W9. Why? Well because corporations are not issued 1099s. Their business entity and tax structure is one where their reporting requirements are much more stringent with the IRS. So the IRS doesn’t need your input on their income (like they would with freelance individuals or
*** – Best practice is to request a W9 if in doubt. The information that is provided on the W9 will indicate if you need to produce a 1099 for them. If you are unsure, consult your tax professional.
How to Fill It Out
There is a great wiki on how to fill out the W9…..so I will not recreate the wheel here. But I will say, the most common mistakes that pop up over and over again are: `1) Not putting the correct name on Line 1 2) Not checking of the correct box (or not checking any box) in Section 3 and 3) Not signing the form.
It is very, very common that if someone is a sole proprietor who incorporated a business, they put the business name on Line 1 — then put the business EIN down where it asks for the taxpayer ID. This is not correct if you file a 1040 tax return and add a Schedule C for your self-employment income. The W9 is not asking for you to give your business formation information. It wants to match up your income for taxation purposes. So your (legal) name should go on Line 1 — then, if you wish, put the business name on Line 2.
The TIN should, in the scenario of a perfect world, be your own personal SS#. Why? Will because even though you have a business, the income from that business is still being attached to your personal tax return. But some people are squeamish about giving out their personal SS# to people they don’t know very well (even if those people are paying them). So on Schedule C, there is a place for you to enter in the EIN that you used on the W9s that you distributed.
So hopefully this was a helpful article. There are a lot of resources out there regarding IRS forms….but sometimes they are just a little too technical and quite frankly boring. If you have more questions or additional questions on tax forms, feel free to reach out for personalized help.