Your Free Guide on Tips for Using Tax Form W-9

Your Free Guide on Tips for Using Tax Form W-9

It’s important to know which tax forms to use and when to use them. If you have unconventional income sources or unique employment, it may be a bit confusing. You typically need to fill out some tax-related paperwork when you earn money. 

For example, employers may make new employees complete a W-4 form, which employers use to withhold a certain amount of taxes from employees’ paychecks. You may need to complete a W-9 form if you work for yourself or earn money in alternative ways. 

A W-9 tax form is formally known as the Request for Taxpayer Identification Number and Certification. Unlike other tax forms, this one does not go to the Internal Revenue Service (IRS). Instead, businesses and individuals use W-9s to share their taxpayer identification numbers with others, such as banks, clients, and other individuals. 

Essentially, a W-9 tax form is a preliminary form that gives payees the information they need to generate the tax forms you need to send to the IRS, such as a 1099-MISC. 

When to Complete a W-9

You may need to complete a W-9 if any of the following scenarios apply:

• You are a self-employed contractor, consultant, or freelancer and earn income. You may send a completed W-9 to any entity that pays you more than $600 in the tax year (January 1 to December 31). This lets your clients know to send you a 1099 form that you submit to the IRS when you file your federal income tax return. 

• You have a home loan. Lenders send you a Mortgage Interest Statement (tax form 1098) annually, which includes information about how much interest you have paid on your mortgage. You can use this form to deduct the amount of interest you paid. 

• You gain income from interest (form 1099-INT), retirement distributions (1099-R), or dividends and real estate transactions (form 1099-DIV), like selling your home. You may need to send your financial institution a completed W-9 if it needs to send you a 1099 form. 

• A creditor cancels or forgives a debt you owe. You usually need to send Form 1099-C to the IRS, in which case you’ll send the creditor a W-9 in exchange for this form. 

• You make contributions to an Individual Retirement Account (IRA).

• You employ one or more people. W-9 information helps you determine if you are required to withhold money from your employees. You also typically need the form to create 1099 forms for your gig workers, freelancers, and vendors.

Information Needed to Complete a W-9

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

• Your full legal name
  • This must be the same name you use when filing your federal income tax return
• Your business name
  • Only if it is different from your full legal name
• Your federal tax classification:
  • Individual/sole proprietor or single-member LLC
  • C Corporation
  • S Corporation
  • Partnership
  • Trust/Estate
  • Limited liability company (LLC) and tax classification
• Exemption codes
  • Only if you are exempt from backup withholding; see below
• Your full address
• Your taxpayer identification number (TIN) 
  • If you are a business, enter your employer identification number (EIN)
  • If you are an individual U.S. citizen or other legal resident with a Social Security number (SSN), use your SSN
  • If you do not have a SSN, use your individual taxpayer identification number (ITIN)
  • If you are a sole proprietor, you can generally use either your TIN or SSN
• Your signature 
  • By signing your name, you confirm that the information on the W-9 tax form is accurate. It is a certification that the taxpayer identification number belongs to you, any codes listed are yours, and you are not subject to backup withholding.

Note: Backup withholding is an amount payers hold on behalf of the payee to pay the IRS. For example, an employer withholds 24 percent from employees’ paychecks for their federal taxes. A W-9 is a declaration that the signer is exempt from backup withholding. Foreign individuals and entities may not be exempt. If you are subject to backup withholding, you’ll cross out item 2 (the sentence that verifies you are not subject to backup withholding) before signing the document. 

Line-by-Line Instructions

Here are the basic steps to complete each line on the W-9 form: 

Line 1 – Name 

If you are an individual, sole proprietor or single-member LLC, enter your name as written on your federal income tax return on Line 1.

Your name must be the same one associated with your Social Security Number (SSN). If you have not notified the Social Security Administration (SSA) of a recent legal name change – like marriage or divorce – use both your new name and the name associated with your SSN. 

If you applied for an individual taxpayer identification number, write the name you used on the application. 

Line 2 – Business Name

If you are part of a partnership, multiple-member LLC, C-corp, or S-corp, enter the business name on both Line 1 and Line 2. 

Your business name must be the same one used when filing federal income tax returns. If you are an individual, sole proprietor or single-member LLC, leave Line 2 blank.

Line 3 – Tax Classification 

Check the box that matches your tax situation. Do not check multiple boxes; only check the box that applies to you. 

Line 4 – Exemptions

If you are completing the form for a business or an organization that is exempt from backup withholding, enter the code representing your exemption reason next to the line labeled “Exempt payee code.”

If  a foreign financial institution needs to report and exempt payments on your behalf, enter the code representing your exemption reason next to the line labeled “Exemption from FATCA reporting code.” 

Lines 5 and 6 – Address 

Enter the complete address of where you live, conduct business, or otherwise have payments and 1099s sent. Include all mailing address details, including number, street, city, state, and ZIP code. 

Line 7 – Account Number 

This section is optional if you want or need to give an account number, such as for a checking or brokerage account. For instance, you may provide clients with a bank account to send your payments. 

Part I – Taxpayer Identification Number (TIN) 

If you are an individual, your TIN is likely your SSN. If you are a sole proprietor, you can enter either your SSN or employer identification number.

If you are a resident alien or otherwise not eligible for an SSN, enter your individual taxpayer identification number (ITIN) in the SSN box. 

• If you do not yet have one, you can apply for an ITIN through the Social Security Administration. 
• If you have already applied, but have not received your ITIN, write “Applied for” in the TIN You can also write “Applied for” in the TIN space.

If you are a business with an employer identification number, enter your EIN. 

Part II – Certification

The section requires your signature and the date to declare that the information you provided is truthful and accurate to your knowledge. Your signature certifies that you are a U.S. citizen, a resident alien, or other lawfully present individual. 

The second sentence verifies that you are not subject to backup withholding. If you are subject to backup withholding, cross out the entire sentence (referred to as “item 2” on the W-9 form) before submitting the document.