Taxes

A 60 Second Guide to the W-9 Form

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The W-9 Form, titled Request for Taxpayer Identification Number and Certification, is an IRS form used to request a taxpayer identification number. The form is generally used when an individual, freelancer, or independent consultant (i.e., non-employee) is hired to provide goods or services to another individual or business. The purpose of the form is to provide needed information so that a 1099 can be completed at the end of the year.

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What to do if you receive a W-9

If you or your business provide goods or services for sale, the buyer may send you a W-9 form to complete. As noted above, the purpose of the form is to give the payor the necessary information to complete a Form 1099 to report payments to the IRS at the end of the year. Generally, companies will not issue payments to non-corporations until they receive a completed W-9.

Completing a W-9 is simple. The information required is your name or your business’ name, address, taxpayer identification number, type of business, and whether you are subject to mandatory backup withholding. The taxpayer identification number, or TIN, is either your social security number or employer identification number. Because I don’t like to give out my social security number, I obtained an employer identification number to use on W-9s. You can get an EIN for free from the IRS online.

Because a W-9 contains confidential information, there are two cautions to keep in mind. First, make sure you actually are doing business with the company requesting the information. And second, be sure to transmit the W-9 in a secure way. This is particularly important if you use your social security number.

When should you send a W-9 to a contractor?

If you or your business hire an individual or non-corporate business (i.e.: freelance writer, laborer, sub-contractor), it is important to have them complete a W-9 Form. This will allow you to issue a form 1099 should your total payments to the individual or business exceed $600 in a year. If you are certain that payments will not exceed this amount, a W-9 is not necessary. The key is to obtain the W-9 before payment is made. Once you've paid the contractor, it can be difficult to get the necessary information from them. In effect, you've lost your leverage. So to protect yourself, obtain a W-9 as soon as you enter into a transaction and before they are paid.

Didn't Obamacare change Form 1099 requirements?

The Patient Protection and Affordable Care Act of 2010, better known as Obamacare, required 1099s to be issued for payments to corporations. Before the law, 1099s did not need to be issued to corporations that provided goods or services to you. The new requirement was the subject of harsh criticism, and the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 eliminated the requirement. (Source: IRS)

If you need help filing your taxes this year, you may want to consider both Turbo Tax and H&R Block. Their free online tax software can make your tax nightmares disappear.

Rob Berger

Rob Berger

Rob Berger is the founder of Dough Roller and the Dough Roller Money Podcast. A former securities law attorney and Forbes deputy editor, Rob is the author of the book Retire Before Mom and Dad. He educates independent investors on his YouTube channel and at RobBerger.com.


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