Step-by-Step Instructions for the Easier W-9 Form

If your business has any employees or operates as a corporation or partnership, it probably needs an EIN to do business and file with the IRS properly. If you need one, check out the IRS’s online application form for the EIN. However, if you are an employee of a business, you should fill out Form W-4, Employee’s Withholding Certificate, instead. Businesses withhold federal and state income taxes, Social Security taxes, and Medicare taxes for their employees and pay the taxes on their behalf. Banks typically request Form W-9s to obtain specific personal data, such as full names, addresses, and TINs. They also use the information to report any income you receive to the IRS, such as interest, dividends, capital gains, royalties, and debt cancellation.

Double-Check Before Sending

W-9s are becoming more common as businesses rely on independent contractors for labor. Independent contractors are not the only ones who must complete Form W-9s. Charities and nonprofits must also request W-9s, provided their status as a charitable organization is represented on the form. Line 4 on the form allows the applicant to indicate whether the organization they represent is contribution margin a charity or a nonprofit by entering the correct exempt payee code.

What Happens to Payees Who Don’t Supply a Correct W-9 Form?

Although the IRS considers scholarships and other education-based financial grants non-taxable, students receiving the scholarship may still be required to fill out a Form W-9. This is because some of the money used can be spent on taxable expenses, such as room and board. Homeowners do not need to issue W-9s unless they work from home, claim the workspace on their taxes as a write-off, and are having work done to their home office. Signing and dating this section certifies that all of the information you’re entering here is correct.

Online Marketplace Platforms – Amazon, eBay, Etsy, etc.

• If the company pays the contractor more than $600 per tax year, the company will then issue a Form 1099 at the end of the year for tax purposes.
• Consider updating your W-4 with your employer yearly or when you have certain life changes like getting married, divorced, or having a child.
• A contractor who refuses to fill out a W-9 could be subject to a $50 fine for each instance.
• Individuals with a sole proprietorship status must enter their SSN into a Form W-9 if they haven’t yet received or applied for an EIN.
• You should only consider refusing to send a Form W-9 if you suspect the entity requesting it may be illegitimate due to the sensitive nature of the personal information found on such forms.
• The payer must collect withholding taxes on certain reportable payments for the IRS.
• If a company pays a contractor less than $600, there is no need to file a Form 1099.

Most individuals and business types are not exempt from backup withholding, but your business might be exempt from backup withholding for certain payments if it’s a corporation. You should only consider refusing to send a Form W-9 if you suspect the entity requesting it may be illegitimate due to the sensitive Insurance Accounting nature of the personal information found on such forms. A W-9 is a form filled out by independent contractors to provide tax information to the business employing them as long as they are paid $600 or more.

• As a small business owner, it is important to collect a W-9 for any person or entity you expect to pay more than $600 in a tax year.
• You must also send a copy of this form to the IRS by January 31.
• The W-9 should be kept in your files for four years for future reference in case of any questions from the worker or the IRS.
• Through the Taxpayer Portal, you can submit automatic extensions, make corrections and reduce expenses related to paper filing.
• When filling out a W-9, ensure you aren’t misreading a question, answering incorrectly, or skipping important sections.
• If filing on behalf of a business, enter the business’s mailing address.

Form 1099-NEC is a new form, used to report payments to non-employees. Before 2020, payments to non-employees were recorded on Form 1099-MISC. The non-employee income reporting was taken out of Form 1099-MISC fedex w-9 starting January 1, 2020, to record other types of miscellaneous payments. Companies hiring individuals with any self-employed status (e.g., gig worker, independent contractor) may request a W-9 form from them.