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How Do I Use a Form W-9?

W-9 form, a type of tax form filed for freelance and contract employees.
A social security number is necessary to fill out a W-9 form.
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  • Written By: N. Madison
  • Edited By: Jenn Walker
  • Last Modified Date: 21 July 2014
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Internal Revenue Service (IRS) Form W-9 is usually used to collect pertinent information about a United States independent contractor or freelancer. This form provides an official way for companies and business people to secure identifying information about the people they pay. Companies use the information they collect when filing required forms with the IRS and providing informational forms to the contractor. A company that hires independent contractors keeps one of these forms on file for each contractor. Sometimes financial institutions that pay interest and dividends use the W-9 form as well.

The right way to use a W-9 form depends on the role of the person who is using it. If a company hires independent contractors or freelancers, it gives a blank copy of the form to each contractor it hires. Once the contractor fills it out and returns it to the company, it is kept in the company's file system. If the contractor relocates or experiences other changes, including a change of business name, he is supposed to complete a new W-9.

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If the person using the W-9 form is an independent contractor or freelancer, his job is to complete the form, sign and date it, and return it to the company that requested it. This involves providing his full name as it is listed on his tax return and his official business name, if he uses one. The independent contractor is also supposed to select his business organization type. For example, a person who is the sole owner of his business or a lone freelancer will usually check the individual/sole proprietor box. There are also check-boxes for corporations, partnerships, and limited liability companies.

Next, the contractor provides his complete address and social security number. If he has an Employer Identification Number (EIN), he may provide that instead of a social security number. If the individual is exempt from backup withholding, he will check the box labeled “Exempt Payee” as well.

The next step in completing the W-9 form is signing it. When a person signs this form, he certifies that he is not subject to backup withholding. If a person is subject to backup withholding, the company that pays him money withholds 28 percent of his money on behalf of the IRS. This may occur if there is a discrepancy between the information provided on the form and the records the IRS has. An individual may also have money withheld if he owes back taxes and has been notified that he is subject to backup withholding.

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Discuss this Article

Izzy78
Post 9

@kentuckycat - Most of the differences in multi-individual companies are in how the profits are divided. In the case of a corporation, all of the profit goes to the company itself. I always think of it kind of as the company being a person.

At least for me, partnerships and LLCs are the most difficult to figure out. The big difference as I understand it is that LLCs have members who are responsible for a share of the company, and are only responsible for their proportional amount of debt (or hopefully profit). In a partnership, everyone involved is responsible for the debt.

In terms of filling out a Form W-9 for tax purposes, you would just pick whatever applies to you. Like the article says, most freelancers would be individuals, but keep in mind a W-9 is for contractors, too, and these can be larger groups in some cases.

kentuckycat
Post 8

For someone who has some experience in this, what is the difference between all of the different business organization types? Obviously, the individual box is easy to figure out, but what about the others? I have heard of corporations and limited liability companies, but never really understood what the differences between them were.

On a related note, is the W-9 ever used for anything besides freelancers? If you were starting your own business, what types of forms would you have to fill out? The W-9 doesn't seem like it would make sense, because you couldn't really hire yourself.

JimmyT
Post 7

Not that it is really important, but I have always wondered what the different letters and numbers for the tax forms mean. If you are an freelancer or independent contractor, you fill out a W9 form, but if you are being hired for a normal job, you fill out an I9 form. It seems like there is some sort of relation between forms with 9s and being hired. Does anyone have any ideas?

It makes sense, but whenever I have done freelancing in the past, I have had to fill out the W-9 form and turn it in before a company would make a payment. When you think about it, though, the companies paying the contractors are just as obligated to report where all their money goes as much the freelancer is.

jmc88
Post 6

@myharley - Figuring out the amount of tax you have to pay can be a problem, especially if you haven't budgeted your money very well.

Luckily, the IRS realizes this, and has put a system in place so that you are supposed to make four different payments throughout the year based on how much you have made. Once it gets to tax time, if you haven't made one of the four scheduled payments, you are subject to late fees based on what you were supposed to pay.

You will never get in legal trouble for not making the four payments (assuming you pay the amount in full at tax time), but you just have to worry about the fines. I have never dealt with it, though, so I'm not sure how much the fines are. I think it is a certain percentage for every day the payment is late throughout the year, so missing the first payment would cost more than missing the last one.

myharley
Post 5

If you are working as an employee for a company, and are not an independent contractor, you don't usually have to worry about filling out a W-9 form.

Filling out the W-9 is very simple, but the worst part is when it comes to tax time. Usually when you are working as an independent contractor, taxes are not withheld from your income.

This means that when you file your taxes, you must report the income you have made, and will still have to pay all the taxes on it.

This can be a financial hardship for some people if they don't have the money set aside to pay these taxes.

I know some people will automatically put aside a certain percentage of their income, so they know they will have the money to pay their taxes when it is time.

Perdido
Post 4

Some people have a fear of tax forms, and they will get a professional to help them with every question. With a form W-9, you need not fear.

I'll admit, when I first learned that I would have to fill one out, I groaned with dread. Tax forms are usually so long and complicated that only an accountant could decipher the language.

However, when I saw the form, I breathed a sigh of relief. It only requested a few simple bits of information. I didn't have to do any complicated math or list all my previous employers. It only took a minute to complete the form.

shell4life
Post 3

When I filled out my form W-9, I knew that I owed back taxes. So, I let the company know that I was subject to backup withholding.

I was actually glad that they withheld the money from my checks. It saved me the headache of having to come up with that amount later on somehow.

I'm not great at math, and anytime I get help with figuring my taxes, I take it. I realize that this percentage was probably more than would normally be withheld for taxes on my small income, but I just loved not having to worry about it.

OeKc05
Post 2

@kylee07drg – I started doing freelance work a few years ago, and I had to fill out a W-9 form as well. I knew that this meant the IRS would have an official record of my information and the company would be letting them know about every cent I made with them. I would have to plan carefully for my taxes.

What I did was base my estimations on my last paycheck with my old employer, through whom I had insurance, a 401(k), and taxes withheld every pay period. I figured up how much of my money went toward each of these things, and I isolated what percentage my taxes would be if I didn't have the money taken out for benefits.

I started taking the same percentage out of my paychecks for freelance work. So far, this amount has always been enough.

kylee07drg
Post 1

I do freelance work, and I have had to fill out more than one W-9 form. Since I do work for several different companies, I had to fill one out for each business. I don't have a company name or an EIN, so I just provided my social security number.

The form was simple, and the instructions were easy to follow. I know that the IRS is aware of each job that I have, so I keep a certain percentage of my income in a savings account, which I will use to pay my taxes next year.

Since this will be my first year doing this, I hope that I have held out enough money. I completed a tax estimation sheet from the IRS website before I started, and it gave me a rough number for how much I would owe based on what I thought I would make.

I used this number to calculate a percentage to hold out of each paycheck. I am praying that I figured correctly.

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