Q: What is a W-9 Form?
Learn what IRS W-9 Form is used for and how it differs from IRS W-4 Form.
A W-9 form is an Internal Revenue Service (IRS) tax form that is used to confirm a person or entity’s name, address, and taxpayer identification number (TIN) for employment or other income-generating purposes. A W-9 form is also referred to as a Request for Taxpayer Identification Number and Certification form.
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What is a taxpayer identification number (TIN)?
For individuals, the TIN will be their social security number (SSN). An IRS-issued EIN (Employer Identification Number) can also be used.
How does a W-9 differ from a W-4?
A W-4 form is more commonly used by companies with W-2 employers. Unlike the W-4, the W-9 does not arrange for any tax withholdings — any required taxes related to the provided W-9 are the responsibility of the TIN holder listed on the document. However, if backup withholding is required, the TIN must note this on the W-9, to inform the company receiving the form of the need to withhold accordingly.
How is W-9 information used?
Companies use W-9 forms to ensure they have the correct name and taxpayer identification number (TIN) for their business partners. Companies then use the information obtained on a W-9 form to create a version of the Form 1099, which reports any income and earnings paid to the person or entity. A Form 1099 must be issued once the minimum income threshold is reached, which is set at $600 as of 2019. Amounts under this threshold still must be reported as income by the TIN holder (but do not require a 1099 form).
What if I don’t collect a W-9 Form?
If you fail to collect a W-9 form from your contractor and do not issue the required 1099-Misc form, the IRS will hold you responsible for not withholding 28% tax on the amount paid and assess penalties for not issuing the required form. The penalties are $260 for each failure to file and an additional $260 for each failure to issue a required 1099 Form. The IRS can be very strict about 1099 Forms. In addition to the potential penalties for failing to file, they can deny the deduction for that expense under audit. It is strongly recommended that you have a W-9 from all contractors, freelancers, and vendors you do business with.
How can I request a W-9 Form from my freelancers?
You can print out the W-9 form from the IRS website and have your freelancers fill-out and sign the form in person. This is what most companies without an FMS do. If you use an FMS like Liquid, you should be able to request W-9 forms from your freelancers and store the forms securely online.
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Category: Compliance Ask Liquid
Updated: June 15, 2020
Quick note: This is not to be taken as tax advice or legal advice or payroll advice. Since tax rules and laws change over time and can vary by location and industry, consult a CPA / tax advisor and/or attorney for specific guidance.