The form is similar to the Form W-4 that employers require employees to complete. In addition to the taxpayer’s identifying information, Form W-9 asks that the contractor state whether they operate as a sole proprietorship, a corporation, a partnership, or a single-member limited liability company. Form W-9 also asks the contractor to certify whether they’re a U.S. citizen or a resident alien. They may need to complete Form W-8 instead if they’re a resident of another country.
Examples of IRS Form W-9
A janitor who cleans on weekends when a business is closed and at a time that’s convenient for them is most likely an independent contractor. Someone you hire to create a website for your business would also be an independent contractor because you wouldn’t control when and how they perform the work. These individuals would require a Form 1099-NEC from you at tax time. Creating Forms 1099-NEC requires that they provide you with a completed Form W-9 with the necessary information. You control an employee’s compensation and determine when and if they’re entitled to a raise. Someone who answers your telephone as a receptionist is most likely an employee if you set their hours and dictate what they should be doing while they’re on the clock. Employees don’t require 1099-NEC forms. You would report their earnings and compensation on Form W-2 instead. You don’t have to incur payroll taxes on behalf of contractors, so many businesses consider this a better, less expensive relationship. But you can’t pay someone as an independent contractor without incurring a tax penalty if the individual doesn’t meet all the legal requirements of being an independent contractor rather than an employee.
Who Uses IRS Form W-9?
Only independent contractors and vendors will complete Forms W-9. You don’t have to issue 1099-NEC forms to C- and S-corporations or entities from whom you purchase products for resale. Payments made to contractors and vendors by debit card, credit card, or through third parties like PayPal are also exempt because the IRS uses a different method to track these transactions. They’re reported on Form 1099-K.
Where To Get IRS Form W-9
Form W-9 can be downloaded from the IRS website, or your contractors can complete the form interactively online then print it out and give it to you when it’s completed. W-9 forms should be provided directly to the employer. Encourage your contractors to complete and send their forms securely because they’ll contain sensitive information. This data should be kept as private and secure as possible to minimize the risk of having it fall into the wrong hands.
What To Do If You Don’t Receive IRS Form W-9
It’s a good practice to request that independent contractors provide you with a completed Form W-9 as soon as you know that you’ll be doing business together. It’s too easy to let these requests slide until January, when you’ll need them. You can download a supply of blank W-9 forms so you can hand them out as necessary when you contract anyone for services. It will save you a good bit of time and effort.
Requirements for Filing Form W-9
The instructions for Forms 1099-MISC and 1099-NEC from the Internal Revenue Service explain the various situations and finer details that require businesses to issue these forms. You must complete, file, and issue them to all contractors to whom you’ve paid $600 or more during the tax year.
