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May 24, 2024

What is Form W-9 from the IRS?

Form W-9 is a critical IRS form that provides information needed to send back a 1099. Learn more about Form W-9 with Thera.

What is Form W-9 from the IRS?

Akhil Reddy
February 10, 2022

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Form W-9is a tax form that communicates a contractor or freelancer’s Tax Identification Number (TIN) to another person, business, bank, or other financial institution. Learn more about Form W-9 and how to fill it out.

There are over a thousand IRS forms for reporting various types of income, tax information, and other pieces of financial data. If your company hires freelancers and independent contractors, you’re likely familiar with many of these forms, especially Form W-9.

Form W-9 is a simple IRS form that serves as an information return and allows a company or business to confirm a person’s name, address, and taxpayer identification number (TIN).

Form W-9 cheat sheet: What you need to know

  • Freelancers and independent contractors fill out Form W-9. Form W-9 is a one-page information return sent from self-employed contractors (payee) to their clients (payers).
  • Businesses that receive Form W-9 do not submit it to the IRS. The IRS makes Form W-9 available to entities and employers to confirm TINs and contact information. However, neither the business nor the person who filled out the W-9 needs to submit it to the IRS.
  • Form W-9 provides information needed for Form 1099. When someone submits a W-9 to your business to get paid for their services, you’ll use the information on the form to send back Form1099.

Who fills out Form W-9?

There are a few situations that might require a W-9 form:

  1. Self-employed individuals. The most common reason a person may need to fill out Form W-9 is that they’re a contractor, freelancer, or service provider and plan on getting paid more than $600 by a single client that tax year.
  2. New bank accounts. Banks may require Form W-9 if a new customer wishes to open an account.
  3. Financial institutions. If a customer invests with a bank or financial institution, they may need to submit a W-9 so the institution can submit a 1099 form. These can be used to report interest income, proceeds from real estate transactions, and business distributions.

Note: All the information found in a W-9 is sensitive information. If it lands on the wrong hands, identity theft may occur. So, self-employed folks should always double-check that they’re sending it to the right person. Companies and those who receive Form W-9 need to ensure they’re keeping the data safe and secure.

Purpose of a W-9 form

Note that your company will never send a W-9 to the IRS. Instead, you’ll need to send back Form 1099 to anyone your company has paid$600 or more to in a single year. If the amount paid is under this threshold, the 1099 form isn’t required; instead, it's reported as the TIN holder's income.

To fill out a version of Form 1099, information such as the TIN (social security numbers or employer identification numbers) and address are required. This is where the W-9 comes in.

The information provided by the self-employed individual should remain undisclosed as their privacy is protected by law.

How to fill out Form W-9

Filling a W-9 form isn’t as complicated as it may seem. It’s, in fact, the most straightforward IRS form to fill out.

Step 1: Fill in your name

The name entered here should match the name on the tax return.

Step 2: Business name

This could be a business name, DBA, or disregarded entity name. A single-member limited liability company is the most common type of disregarded entity. However, S corporations and sole proprietorships don’t fall under this category.

This spot can be left blank if there is not a business name (common for solopreneurs and sole proprietorships).

Step 3: Federal tax classification

This defines the independent contractor’s status as classified in the federal taxes. This is whatever business entity applies to the form filler: entities could include S corporation, C corporation, sole proprietorship, partnership, limited liability company, trust/estate, or other.

Step 4: Exemptions

This step is for specific businesses and entities, and individuals don’t need to fill this section out. If it applies to you, you will need to provide a letter or number code indicating the reason.

  • The first line should be filled only if your business is exempt from backup withholding. And in cases where it's not, the employer will send the IRS a withheld income tax from the pay, which will be at a flat rate of 24%.
  • You should fill in the second line if the report required by FACTA (Foreign Account Tax Compliance Act) is exempt. Certain situations may affect your choice, but the third page of the form outlines all the exemption situations.

Step 5: Address

The fifth step requires filling in your address, city, state, and zip code. Preferably, add the address that you use on your tax return.

Step 6: Requester’s address

This is an optional step where you can provide your requester's name and address. This box is handy as it can help the contractor keep track of the person or business they disclosed their tax identification number to.

Step 7: Taxpayer Identification Number

This part is termed Part I by the IRS. You must provide your entity’s TIN which can be either your employer identification number (EIN) or, for sole proprietors, SSN (social security number).

For new businesses, the IRS allows you to apply for your number, and on the space for TIN, write “applied for.” However, you will be subject to backup withholding until you get the number.

Step 8: Certification

Part II requires a date and signature and certifies that all the information included is accurate.

If you hire globally, different rules apply

What you just read above applies to hiring in the United States. But if you want to hire globally––and find the best talent in the world––there are different rules to follow. That’s what Thera is here for.

Thera allows you to automate your global payroll process so you don’t have to worry about the nitty-gritty of payroll taxes, IRS forms, and administrative compliance in the United States or abroad. We’ve spent tens of thousands of hours researching and building this stuff and would love to show you how Thera works.

If you’re building a team that hires employees around the world, we can help.

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Elizabeth Wellington

Liz writes about business, creativity and making meaningful work. Say hello on Twitter or through her website.

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