W-9 Form and Taxes: What Independent Contractors Need to Know

Are you an independent contractor, freelancer, or business owner? If so, you may have received a W-9 form from a client or customer. But what is a W-9 form, and why do you need to fill it out? In this guide, we’ll walk you through the ins and outs of the W-9 form, including who needs to file, how to fill it out, and what happens if you don’t.

Key Takeaways

• The W-9 form is used by businesses and organizations to collect tax-related information from independent contractors, freelancers, and other non-employees.
• You’ll typically receive a W-9 form when you begin working with a new client or customer that expects to pay you more than $600 in a calendar year.
• The W-9 form is used to prepare 1099-MISC forms and determine backup with-holding requirements.
• If you’re a business owner or self-employed individual hiring a contractor or freelancer, it’s essential to request a completed W-9 form before making any payments.

What is a W-9 Form?

A W-9 form, also known as a Request for Taxpayer Identification Number and Certification , is a document provided by the Internal Revenue Service (IRS) to collect information from payees, including independent contractors, freelancers, and self-employed individuals. The information provided on the W-9 form is used to determine whether the payee is subject to backup withholding and to report income to the IRS.

Who Asks for a Completed W-9?

Businesses, corporations, and other entities that pay individuals, sole proprietorships, corporations, partnerships, or single-member limited liability companies (LLCs) for services or goods may request a completed W-9 form. This includes:

• Clients and customers who hire freelancers or independent contractors
• Businesses that pay rent, interest, dividends, or capital gains
• Banks and financial institutions that pay interest on deposits or investment accounts
• Government agencies that make payments to individuals or businesses

Who Needs to Complete Form W-9?

You’ll typically need to complete a W-9 form if you:

• Receive (or except to receive) payments of $600 or more from a client or customer in a calendar year, and you’re not an employee of that client or customer
• Are a sole proprietor, freelancer, or independent contractor
• Are a single-member LLC, single-member S-Corp, or single-member C-Corp
• Are a partnership, multi-member LLC, S-Corp, or C-Corp
• Are a trust or estate that receives income subject to backup withholding

What Information is Required on a W-9 Form?

To complete a W-9 form, you’ll need to provide the following information:

• Line 1: Name: If completing a W-9 as an individual, provide your full legal name. If completing as a sole proprietor or a single-owner LLC, enter the full legal name of the owner as it appears on their tax return, and enter the business name or DBA on Line 2. If completing a W-9 as a Partnership, an LLC with multiple owners, C Corporation or S Corporation, enter the name on line 1.
• Line 2: Business Name: Your business name, trade name, or doing business as (DBA) name (if different from your personal name)
• Line 3: Federal Tax Classification: Check the one box that is appropriate for your business entity federal tax classification:
  + Corporation
  + Individual/Sole Proprietor or Single-Member LLC
  + Limited Liability Company (LLC)
  + Partnership
  + Trust/Estate
• Line 4: Exemptions: If completing Form W-9 as an individual, you can skip this section. If your business is exempt from backup withholding (only applies to certain businesses and organizations), fill out the applicable exemption codes.
• Lines 5 and 6: Address: Your mailing address
• Line 7: Account Number(s): Your account number(s) or other identifier(s), if required by the payer
• Part I: TIN: Your taxpayer identification number (TIN):
  + Social Security number (SSN) for individuals
  + Employer identification number (EIN) for businesses
• Part II: Certification: Sign and date the form, certifying that the information is accurate and complete.

What is Backup Withholding?

Backup withholding is a type of tax withholding that the IRS requires payers to withhold from payments made to individuals or businesses that have not provided a correct TIN or have not certified that they’re not subject to backup withholding. The backup withholding rate is currently 24% for tax years 2024 and 2025.

Form W-9 vs. Form W-4: What’s the Difference?

A W-9 form is completed by an individual or business entity to provide the correct taxpayer identification number, like your social security number (SSN), individual taxpayer identification number (ITIN), adoption taxpayer identification number (ATIN), or employer identification number (EIN)  to report amounts paid to you. Some common examples of information reports completed using information from a W-9 include Form 1099-NEC, Form 1099-K, Form 1099-INT, and Form 1099-DIV, to name a few. 

A W-4 form, on the other hand, is used so that your employer can withhold the correct federal income tax from your pay check. This information is used when completing your Form W-2 at the end of the year. Consider updating your W-4 with your employer yearly or when you have certain life changes like getting married, divorced, or having a child.

Frequently Asked Questions:

Q: Who needs to complete a W-9 form?
A: Typically independent contractors, freelancers, self-employed individuals, sole proprietors, single-member LLCs, and certain businesses and organizations that receive payments.

Q: What information do I need to provide on a W-9 form?
A: Your name, address, taxpayer identification number (TIN), and business information (if applicable).

Q: What happens if I don’t provide a correct TIN on my W-9 form?
A: You may be subject to backup withholding of up to 24% of your earnings.

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