Anytime a company hires someone to do work for them who is not an employee, there are going to be some tax forms required.
Generally, if the individual is paid $600 or more during a given year, the business should send them a 1099-MISC. This form tells the individual how much money was reported as paid to them to the IRS.
In order for a business to fill out a 1099-MISC for their vendors, they will need some information from the vendor first. You will need to know what is a W9 in order to get the right information.
What is a W9?
A W9 form is a form that businesses will request a vendor complete in order for it to have all of the information needed for tax purposes.
According to the IRS, this form is used to provide the correct taxpayer identification number (TIN) to the business who is required to file a 1099-MISC to report income paid to you.
Information Provided in a W9
There are several pieces of information in a W9 that you will submit.
- Your Name: This is either your name or your business name. The name entered here must match exactly to the name you use on tax returns.
- Business name: If you have a business name that differs from the name provided on the first line, provide it on the second line. This could be a D.B.A. name.
- Entity type: Check the box for the type of entity that is listed on line 1.
- Address: Provide the mailing address for your business. You should be able to receive mail at this address since this is where the business will send any 1099-MISC forms.
- Taxpayer Identification Number: This will be either a social security number or employer identification number. The number you provide must match the name given on line 1. For example, if you give your own name, you must give a social security number. If you give your business name, you can use your employer identification number.
- Certification: You will also need to sign the W9 certifying that you have provided correct information.
A W9 may contain sensitive information like your social security number. This information can be used for identity theft, so only provide it to companies that you know and trust. If someone is requesting a W9 from you who you do not know, don’t give it to them.
Workers: Do You Have To Provide A W9?
If a business that you have done work for asks for a W9, generally you must provide them with one. Failing to provide them with a W9 will result in 28% of your earnings being withheld by the business. This is known as backup withholding.
If you provide a company with incorrect information, there are serious penalties that the IRS can impose.
Businesses: Do You Have To Collect A W9?
If you don’t collect W9 information from your vendors, you won’t be able to file 1099-MISC forms for them. There are also very serious financial penalties that you can face.
Be sure to collect a W9 from any US based person who is not an employee that you made payments to during the year. For non-US based people, you should request a W8-BEN.