Filing taxes are probably some of the most necessarily complex tasks for individuals. But if you’re a 1099 employee, the task becomes even harder.
In this article, we take you through why do 1099 employees have to fill a W9 and how to fill one.
What is a W9 Form?
A W9 form is one of the many tax forms used by the Internal Revenue Service (IRS). It is issued to confirm a person’s name, living details like their address, and crucially, the Taxpayer Identification Number (TIN). Therefore, the W9 form is also called the “Request for Taxpayer Identification Number and Certification Form.” Usually, employers use the W9 Tax Form to verify the tax details of the employee/contractor/freelancer.
People often confuse the W9. vs. 1099 form. Note that a 1099 form helps to generate the W9 form.
Now that we know what a W9 tax form is, here are all the other necessary details that you need.
When and Who Can Request a W9 Form?
The TIN and certification form requests are critical for hiring new employees or doing business with freelancers and contractors. It is a written request for information for use only to identify the receiver’s TIN. If you are an employer, you may need to file form 1099. In this case, you can request your employees to fill out the W9.
The W9 form’s purpose is to verify your TIN to file form 1099. Further, 1099 is a necessary form that reports your earnings/losses generated by your employer and filed with the IRS. If you are worried you do not know your TIN, it is the same as your Social Security Number. If you’re filling W9 for business, it should be the same as your Employee Identification Number.
The information on who is required to fill out a W9 form is on the IRS website. You will be required to fill out a W9 form to provide TIN to people required to file information returns. These information returns would include reports of
- Income paid to you
- Real estate transactions
- Mortgage interest you paid
- Acquisition or abandonment of secured property
- Cancellation of debt
- Contributions you made to an IRA
Where to Get a W9 Form?
Note. Only employees/contractors/freelancers who are resident citizens of the United States of America are issued W9 forms. The IRS requires other people (like resident aliens) to use form W8 or form 8233 instead.
When can Employers Request W9 forms?
Employers need to request W9 forms if they are legally required to submit Form 1099 with the IRS. Form 1099 is only necessary after reaching a minimum income threshold. In most cases, that minimum threshold is USD 600.
If you’re a TIN holder who earns below USD 599 annually, you must report this income on your own. In this case, you do not qualify as a W9 employee, and your employer need not file the 1099 form.
What Happens After Collecting the Employees’ W9 Form?
Once you’ve collected a W9 form from your employee, it is time to create a 1099 form. A 1099 form contains information about any income the TIN holder might receive from you. However, it does not include the income on a W2 form. It contains the following.
- income paid as a part of a contract
- Real estate transactions
- Dividends paid against investments
- Cancellation of debt
- Contributions made by the IRA
Employers must know how to manage their employees and protect their privacy. Ensure that you don’t disclose the details given to you in a W9 form to any third parties. It violates your employee/freelancer/contractor’s right to privacy, protected under the law. Any violations of this rule will lead to severe consequences, including but not limited to civil and criminal prosecution.
W9 vs. W2 Forms
Despite being filed for two different purposes, both employers and employees often confuse the two forms. Both W9 and W2 forms are issued to employees earning more than USD 600 a year. Your employer will send the form to you, the Social Security Administration, and the required federal and state authorities. However, W9 forms merely act as a confirmation of your TIN, name, and address. While the employer sends you the W2 forms, you send W9 forms to your employer.
Similarly, there is also confusion when it comes to W9 vs. W4 forms. Unlike W4 forms, W9 forms do not directly instruct your employer to practice backup withholding.
How to Fill Out a W9 Form 2021
While the W9 form is relatively easy to read and fill, tax forms are extremely daunting and intimidating. Any misinformation that you might provide is equated to perjury and lying under oath. However, don’t let this get to you. It is easy to fill out the W9 online. Follow these steps, and you should be fine. Here are the W9 instructions:
- State your name exactly as it is on your Tax Return.
- Enter your business name only if the name is different from your name. Contact your CPA for the exact details.
- Declare the type of your business entity. The choice is between sole proprietorship, partnership, C corporation, S corporation, trust/estate, LLC, or other. It is easy to figure out which type of entity you are. For most types, you will have already filled out paperwork, establishing the kind of entity. If you haven’t filed such paperwork before, you’re either a sole proprietorship or a partnership. For clarity, if you own your business with a partner, it is a partnership; if not, pick sole proprietorship.
- Exemptions: Leave this box empty unless you’ve received exemptions from backup withholding or report under the Foreign Account Tax Compliance Act.
- Fill in your street address, city, state, and ZIP code. If your home address is different from your business address, you should use the one on your tax returns.
- Record the information of the employer who has requested a W9 form. It is optional but highly recommended.
- Now for the most crucial step, and often the most confusing one as well. The IRS has labeled this section as Part 1, where you must provide your business with your TIN. Further, 99% of the time, your TIN will be the same as your Social Security Number. However, if you employ other people, you will be assigned an Employer Identification Number. If you are a sole proprietor and have an EIN, the IRS prefers you input your SSN here.
- You may apply for an EIN. If so, write your SSN and “applied for” in the space where they request your TIN. You will be subject to backup withholding until you refurbish the W9 tax form with a TIN.
- Step 8 is attestation about your truthfulness. Here are the statements that you should certify to be true under the penalty of perjury.
- The TIN is accurate.
- I am not subject to backup withholding. (If you are subject to backup withholding, cross this out. *important*).
- I am a US citizen or other US person.
- The FATCA code that I have entered in this form is accurate.
Once you have completed these steps, ensure to check the form once more for any inaccuracies. Sign the form, and return it to your employer. You can sign this form digitally, using several online software, like DigiSigner. If you’re still confused about W9 forms, many W9 examples show how to fill out a W9 form 2021.
The W9 form is a crucial yet simple step in the process of filing your income tax returns. Filing taxes can be incredibly troublesome. However, we hope this blog clarified how to fill out a w9 form! It is a simple, albeit crucial, form to fill out to ensure tax compliance. Be careful and methodical, and filling out the W9 tax form will be an easy task.