A Form W-9 is a document that is issued by the United States Department of the Treasury's Internal Revenue Service (IRS) and is used when a person or company needs to request a Taxpayer Identification Number (TIN), claims for exemption and specific certifications from a person, company, trust or estate in the U.S. The form must be completed and returned to the requesting person or company, which used the information for tax filing purposes. A Form W-9 is not filed with the IRS. One of the most common instances when this form is used is when a person has provided his or her services as an independent contractor or freelancer, and the person or company for which he or she worked needs his or her TIN to report the payments to the IRS.
This form, which is sometimes miswritten as a Form W9, first asks for information such as the person or entity's name and address. There is a section where a box must be checked to indicate what type of person or entity is completing the form, such as a trust or estate, an individual, a corporation, a partnership or an exempt payee. The specific classification for some types of companies also must be indicated.
Taxpayer Identification Number
The next section on the form fulfills its primary purpose, because it is where the person or entity must provide a Taxpayer Identification Number. For an individual, this usually is his or her Social Security number. If he or she is a resident alien, however, it is his or her Individual Taxpayer Identification Number (ITIN). For a company or other entity, the TIN is its Employer Identification Number (EIN). A sole proprietor who has an EIN can enter either that number or his or her Social Security number.
In the next section, the person or entity can certify that certain things are true. The first is that the TIN that is listed is correct or that a new TIN is in the process of being issued. Next is that the person or entity is not subject to backup tax withholding, although this line must be crossed out if it is not true. Third is that the person or entity is a U.S. citizen or other U.S. person, as defined by the IRS, including a resident alien, company, estate or a specific type of trust. A signature and date are then required in most cases.
There are some instances in which no signature is required or in which the second item in this section should be crossed out. The form includes instructions that indicate how this section should be properly completed. Among the various situations that have special instructions for this section are when the form is used for the purpose of real estate transactions, interest or broker accounts, mortgage interest, cancellation of debt or contributions to an individual retirement account (IRA).
The requester will use the information collected on the Form W-9 to produce a Form 1099. A 1099 details the money that was paid to the person or entity during that tax year. This form is both sent to the person or entity and filed with the IRS. The requester can use a substitute Form W-9 if it is substantially similar to the form issued by the IRS. If this is the case, the person or entity is required to fill out the substitute form rather than a Form W-9.
Taxes Not Withheld
Unlike the Form W-4, which employees use to authorize an automatic tax withholding from their paychecks, filling out a W-9 does not causes taxes or Social Security payments to be withheld. An independent contractor, for example, is solely liable for the full amount of taxes on his or her income. Therefore, payments that are made to an independent contractor do not have any amounts withheld. The payer reports on a Form 1099 how much was paid during the year, and the independent contractor must pay the taxes.
In some cases, a person or company might request a Form W-9 to be filled out but will end up not needing to use the information or file a Form 1099. If the payments made during the tax year were less than a certain amount, for example, then a Form 1099 does not need to be filed. For independent contractors, the minimum amount was $600 US Dollars as of 2012. Some types of payments are exempt from needing to be reported on a 1099 as well. Detailed instructions and all of the forms are available on the IRS's website.