What Is a W-9 Forms | BambooHR (2024)

FAQs

What Is a W-9 Forms | BambooHR? ›

Businesses use W-9 forms to collect information from contractors or non-employees they are paying. Most importantly, W-9s help businesses collect contractor or non-employee's tax identification number or social security number.

Use Form W-9 to provide your correct Taxpayer Identification Number (TIN) to the person who is required to file an information return with the IRS to report, for example: Income paid to you. Real estate transactions. Mortgage interest you paid.

A W-9 is needed when the business pays a freelancer, independent contractor, or self-employed worker $600 or more in one year. The purpose of a W-9 form is to create an official record of a business relationship between a company and an individual who is not a regular employee.

All payees listed in items 1 through 4 and 6 through 11 are exempt. Also, C corporations are exempt. A person registered under the Investment Advisers Act of 1940 who regularly acts as a broker also is exempt. Barter exchange transactions and patronage dividends.

The main differences between W-9 and 1099 tax forms are that a W-9 is filled out by the supplier or independent contractor to provide their tax and payment information to the payer, whereas 1099 forms are provided by the payer to document the supplier or contractor's gross earnings after business has been done, which ...

If a worker is an independent contractor, freelancer, or self-employed, Form W-9 must be provided to those whom you have earned over $600 from without having been hired as an official employee.

If a payee refuses or neglects to provide a TIN when properly requested by a business, the business should immediately begin backup withholding, at the rate of 28 percent, on any reportable payments made to the payee (and remit this amount to the IRS).

Companies who engage you as a contractor or make payments to you for services you provide will likely ask for a completed W-9. Likewise, banks, brokerage firms and other payers typically ask for a completed W-9 to prepare your 1099s to report items such as interest, dividends, cancellation of debt and more.

While tax form W-9 is used most commonly by independent contractors, gig workers, and freelancers who are paid $600 or more by a business, it can also be used to report other types of income to the IRS. Examples of the types of income include: Acquisition or abandonment of secured property. Cancellation of debt.

How does a W9 affect me? ›

Payments earned by a contractor who completes a W-9 form aren't subject to IRS withholding, meaning it's the payee's responsibility to report the income and pay the self-employment taxes, which is calculated at a rate of 15.3 percent as of 2022.

The IRS Form W-9 is a request for taxpayer identification number (TIN) and certification. An independent contractor fills out this form when you hire them to work for your business, so you have the tax information you need to record how much you paid them at the end of the tax year.

So, if you are an individual, sole proprietor, or full time employee then you MUST complete and return a W9 to the person who's paying you, by law. If you are a corporation/LLC then you are NOT obligated to provide a W9 and the employer/client is NOT obligated to send you a 1099.

Form W-9 (or an acceptable substitute) is used by persons required to file information returns with the IRS to get the payee's (or other person's) correct name and TIN. For individuals, the TIN is generally a social security number (SSN).

In general, income that results from a W-9 arrangement is not subject to IRS withholding. Rather, it is the payee's responsibility to claim the income on his or her tax return and to pay any appropriate taxes.

An individual who is a U.S. citizen or U.S. resident alien; A partnership, corporation, company, or association created or organized in the United States or under the laws of the United States; An estate (other than a foreign estate); or. A domestic trust (as defined in Regulations section 301.7701-7).

What Is a W-9 Used For? A self-employed individual or independent contractor sends a completed W-9 form to the business to which they provide services, and the business uses that information to generate a Form 1099. The 1099 is the form that independent contractors will then use to report their income to the IRS.

In summary, a W-2 is completed by employers to summarize employee earnings. A W-9 is completed by independent contractors to record their TIN and work status for the employer and tax authorities.

When comparing the W-4 vs W-9 forms, the difference is that an employee fills out a W-4 while an independent contractor fills out a W-9. Contractors are responsible for their own tax filings. This content is for informational purposes and is not intended as legal, tax, HR, or any other professional advice.

Payors and withholding agents are allowed to use their own Forms W-9, which are not the official Internal Revenue Service (IRS) published Forms W-9. These forms are called substitute Forms W-9. In order to be sure that the substitute Form W-9 is reliable, a few items must be in place. Substantially similar content.