If you are working in the US, then you must be aware of the IRS tax compliance requirements as well. And, if you are an independent contractor or someone who is working with one, then you should have the information about Form W-9.
Knowing that there are various forms, it can get confusing to have details about every form, right? Well, let us confirm one thing, Form W-9 is one of the easiest forms to fill. But there could be huge penalties if someone fails to return the requested form.
What is Form W-9 and When do you need to request it?
Form W-9 is also considered as a request for Taxpayer’s Identification Number as well as certification. It is required to fill out another important tax document; that is, Form 1099-NEC. The form helps the companies to fill the right TIN while filing the payments of the freelancers they hired.
So basically, W-9 is a precautionary measure to make sure that wrong 1099-NEC is not being issued.
If you are a freelancer or independent contractor yourself, you need not worry about requesting the form. You will receive it from the payers you render your services to. However, if you are the one who appointed a freelancer, and made a non-employee compensation/payment of over US $600, then you must request a W-9 form from that individual.
How to complete the form?
As already said, Form W-9 is one of the easiest US tax forms to fill. Although it is a 6-page long form, only one page needs to be filled. There are 7 boxes which one should fill and take less than 10 minutes to complete.
- Box 1 contains your name.
- Box 2 needs your business name (if applicable).
- Box 3 is like a multiple choice question where you have to specify the type of business entity. There are options given for sole proprietor, corporation, partnership, and LLC. You need to tick mark one.
- Box 4 is to report any kind of withholding (if any) or the FATCA report.
- Box 5 and Box 6 are reserved for your email address.
- Box 7 requires your account number.
That’s it, these are the 7 things that need to be filled in a W-9 Form. Easy, no?
You will be required to fill the TIN or SSN, and sign the form at last as well.
Why should you be aware of the entity requesting Form W-9?
As mentioned, Form W-9 includes some of the crucial information about you, your business, and your work. This is why you must not fill every W-9 form that has been requested without verifying it first.
- Make sure you know the filer
- Ensure that you have received an amount exceeding the threshold limit
- Know the reason of being asked to fill a W-9
- If you are an employee, you must receive Form W-4 and not W-9
Therefore, it is important to know who is requesting the W-9 and save yourself from any fraud or intently harm.
When do you need to update your W-9?
In case of any changes to your information provided in the Form W-9, you must update it to the entity who requested the form. There could be a name change of the person, entity, or address change. It is also possible that the type of business entity has been changed, such as from self-employed to LLC. In such situations, it is mandatory to update your Form W-9 to comply with the Tax requirements set by the IRS.
To know more about why Form W-9 is required and what Form 1099-NEC is, you can read about Form 1099 NEC and how is it different from Form 1099 MISC.
Written by – Priyanka Rampal
Follow us for more good reads and helpful insights if you have queries related to finance management and tax filing!