Tax form W-9 is most commonly used to collect tax information from independent contractors. Here are some of the most common questions and problems.
What is a W-9 tax form?
Form W-9 is similar to the W-4 forms that employees give to their employers. It’s used to collect an independent contractor’s name, address, and tax information.
“W-9” is just an IRS identification number and doesn’t have a special meaning. The official title of Form W-9 is “Request for Taxpayer Identification Number and Certification.”
Unlike with hiring employees, employers don’t normally withhold taxes for independent contractors. However, Form W-9 requires the contractor to certify that he isn’t subject to backup withholding requirements.
In addition to independent contractor payments, Form W-9 can also be used for things like:
- Bank interest
- Dividends from stocks, mutual funds, or other investments
- Real estate sales
- Prizes and awards
- Mortgage interest
- Student loan interest
- Canceled debt
Do you file Form W-9?
No, Form W-9 is between the payer and payee. You do not file Form W-9 with the IRS.
The IRS only requires a specific form to make sure that all the needed information is collected and it’s submitted under penalties of perjury.
The information collected is used primarily to issue 1099s that will be filed with the IRS.
You should still keep copies of each W-9 form in your records in case of audits or other issues.
Is a W-9 a tax-exempt form?
A W-9 is not the same thing as a tax-exempt form. A W-9 is primarily to collect the income tax information of someone who will be receiving payments.
States with sales taxes will usually have a specific tax-exempt form or certificate to allow tax-exempt purchases.
Does a W-9 form report to Social Security?
W-9 forms are not filed with or reported to Social Security.
However, Social Security will receive the income information from your tax returns. If you don’t report your 1099 income on your tax return, you’ll usually get a letter from the IRS asking why.
Do you have to pay taxes on a W-9 form?
You’ll usually only be asked for a W-9 form because you’re going to receive payments that may be subject to taxes. However, you may still have deductions or exceptions that mean you won’t owe any taxes.
Can you use a DBA on a W-9 form?
Yes, you can sign a W-9 form as a DBA, LLC, or other business entity. You can also use an employer identification number in place of a Social Security number.
However, your contract and payments should match. For example, if you use a DBA, the contract should be in the name of your DBA and the payments should go to your DBA.
Can you use a PO Box on a W-9 form?
Yes, you can use any valid mailing address on a W-9 form.
Backup Withholding
There are certain situations where an independent contractor or another payee may become subject to backup withholding. These can include:
- Not providing a properly filled out Form W-9
- The IRS saying the payee’s taxpayer identification number is incorrect
- The payee previously not reporting taxable income
When should you request a Form W-9?
It’s a best practice to collect Form W-9 from all contractors before they begin work. This prevents any issues with having to collect information or dealing with backup withholding later.
While you usually won’t have to issue a Form 1099 until a contractor receives more than $600 during that year, you usually don’t want to wait until that point. In addition to having to chase the contractor for paperwork, it also increases your accounting burden to track when contractors cross the $600 month.
If you want to have a policy that you won’t pay a contractor without a Form W-9, this generally needs to be in your contract before the contractor starts work. Otherwise, the contractor is typically entitled to be paid as agreed even without providing a W-9 (minus applicable backup withholding).
It’s common to request a W-9 for a corporation or S-corporation even though you won’t normally issue a 1099 to a corporation. This confirms the payee’s tax status and protects you if the IRS says you should have issued a 1099.
Where can you get a Form W-9?
You can download a copy of Form W-9 on the IRS website. It’s common to collect W-9 forms by mail or in-person.
Because Form W-9 contains sensitive tax information, you should never send or request one by email or other unsecure online methods. If you need to collect W-9s online, use a secure file-sharing service or a dedicated Form W-9 and 1099 service.
If you use payments through a payroll service or payment processor, your payment service may collect W-9s on your behalf.
Many payroll services and payment processors use a substitute W-9. A substitute W-9 is a custom form that collects all of the information and certifications on the official IRS form.
The purpose of the substitute W-9 form is simply to make it easier to enter information in the online application. Substitute W-9s are normally OK as long as you collect all of the needed information.
I do not recommend making a substitute W-9 on your own unless you have a tax accountant or attorney review it.
Can I get a W-9 form at the post office?
The post office no longer has copies of tax forms since they are now easily available online. If you don’t have access to a computer or printer, you may be able to print a W-9 at your local library.
How do I get a copy of my W-9 form?
You should keep a copy of each W-9 form you submit. You can also ask the requester for a copy.
The IRS will not have a copy of your W-9 form since W-9s aren’t filed with the IRS.
Do you request a W-9 if you pay through a 1099-K issuer?
If you make payments through PayPal or some other electronic payment service that issues Form 1099-K, you should not report the same income on Form 1099-NEC. The tax reporting obligation shifts to the payment processor.
If you pay exclusively through 1099-K issuers, you may not need to collect W-9 forms, since you won’t have any payments to report.
Do non-profits need to fill out a W-9?
Non-profits should generally fill out a W-9 on request. It does not mean you will owe taxes. You’re just confirming your tax information which includes your non-profit status.
If you’re the payer, you should ask your accountant if you need to collect W-9s from non-profits. In most cases, the answer will be no.
When do landlords ask for W-9s?
Landlords will commonly ask for a Form W-9 when the security deposit is held in an interest-bearing account with interest paid to the tenant. The landlord will usually need to issue a 1099 for the interest each year.
Note that a 1099 is not needed for the return of the initial security deposit since that money belongs to the tenant.
Can minors fill out a W-9?
Yes, when minors are paid, they should fill out a W-9 with their own name and taxpayer identification number.
Why is an estate asking for a W-9 for an inheritance?
Estate executors often need to collect W-9s for the estate’s own tax return. The W-9 helps confirm how the money was paid out.
Inheritances aren’t normally subject to federal income taxes. State income taxes may apply depending on the state.
Filling out a W-9 does not change whether or not taxes apply.
Why is an insurance company asking for a W-9?
Certain types of insurance payments may be taxable. This usually includes payments that replace taxable income (such as lost wages) and interest on delayed payments.
Filling out an insurance company W-9 or receiving a 1099 does not mean you owe taxes. You’ll confirm the type of income you received and determine any taxes owed when you file your tax return.
Can you sign a W-9 electronically?
Yes, the IRS generally allows electronic signatures. This includes typing your name in the signature box or submitting copies of a hand-signed form.
W-9 Penalties
There are several possible penalties related to Form W-9.
- Failing to furnish a TIN (taxpayer identification number): If the payee fails to provide a correct TIN to the requester, the IRS may impose a $50 penalty. There is no penalty if the failure is due to reasonable cause.
- False information: Providing false information to avoid backup withholding or tax reporting is subject to civil and criminal penalties. There is a $500 fine for making a false statement that results in no backup withholding.
- Misuse of TINs: If the payer misuses TINs submitted on Form W-9, the payer may be subject to criminal and civil penalties.
There are separate fines for not issuing 1099s by the IRS deadlines.
