Step-by-Step Instructions for the Easier W-9 Form

Filing an incorrect W-9 will result in a $50 fine for each incorrectly filed form unless the mistake was reasonable and without willful neglect. False fedex w9 statements with no reasonable basis can also result in the IRS issuing a $500 fine. Musicians and bands are considered independent contractors and must fill out Form W-9s when they make more than $600 from a gig. Homeowners do not need to issue W-9s unless they work from home, claim the workspace on their taxes as a write-off, and are having work done to their home office.

Persons Receiving Miscellaneous Income

Remember that the assets = liabilities + equity IRS gets a copy of any 1099s, too, so be sure to accurately report any payments you received during the year when filling out your tax return. Beginning with Tax Year 2020, you must use Form 1099-NEC, Nonemployee Compensation, to report payments of nonemployee compensation (NEC) previously reported in box 7 on Form 1099-MISC. The separate instructions for filers/issuers for Form 1099-NEC are available in the Instructions for Forms 1099-MISC and 1099-NEC PDF.

Failure to Remit Form W-9

• The IRS considers canceled debt taxable, except under specific circumstances.
• Failing to include the correct number can result in issues with your payments, backup withholding, and your tax return.
• If a payer must file an information return to the IRS to report payments made to or by you, they’ll likely ask you to complete the form.
• If a contractor refuses to provide a W-9, you must begin backup withholding.
• Musicians and bands are considered independent contractors and must fill out Form W-9s when they make more than $600 from a gig.

Attackers are sophisticated and can make a message look like it came from your bank or even your client. And if you get an email from the IRS, it’s definitely a phishing attempt, and you should forward the email to The IRS doesn’t initiate contact with taxpayers via email. A bank, a brokerage firm, a lending institution that has canceled a debt you owe, or the issuer of a prize you have won all might ask.

• If you are the sole owner of an LLC (a Single-member LLC), you are probably considered a disregarded entity for tax purposes.
• Banks typically request Form W-9s to obtain specific personal data, such as full names, addresses, and TINs.
• Amanda Bellucco-Chatham is an editor, writer, and fact-checker with years of experience researching personal finance topics.
• Though similar sounding, they have very different purposes, recipients, and uses.
• Instead, W-9s are passed on to the person whose money has been invested.
• Become familiar with Form W-9 and the IRS regulations concerning it, learn who needs one, how to fill it out, what information is needed, and how to request one from another person.
• A Form W-9 must be completed by one party and furnished to a second party if the second party is going to furnish specific types of payments in the future.

What Is a W-9 Tax Form?

Beginning in 2020, the information on the W-9 is used to complete a 1099-NEC form reporting non-employee income for a tax year (like a W-2 form for employees). You sign and date the form in this field, declaring the information you have provided is accurate to the best of your knowledge. You will need to cross out Item 2 of the certification if you are subject to backup withholding for failing to to report all interest and dividends on your tax return. Certain businesses and organizations are exempt from backup withholding in certain instances and will need to fill out this line. Should any of these apply to your situation, you’ll need to provide a number or letter code from the instructions representing the reasons behind making this declaration.

Then email the encrypted file and send the decrypting password in a separate email. Alternatively, you and the requesting entity may use a secure file-sharing platform to send and receive the electronic form. If you submit your Form W-9 in paper format, directly delivering it to a payer or an entity requesting it from you is the fastest and the most secure method. Individuals with a sole proprietorship status who have filed a Bookstime Form SS-4 and received an Employer Identification Number have the option to enter their EIN instead of their SSN. But an Employer Identification Number (EIN) may be needed instead of their Social Security Number in two instances.

• For more information on Form 945, see Topic No. 307, Backup Withholding and Publication 15, (Circular E), Employer’s Tax Guide.
• Businesses use W-9 forms to collect taxpayer identification numbers for nonemployees who work for them during the year.
• A bank or lending institution may ask for a W-9 as part of the process of setting up a new account, as interest and dividend payments are furnished through Form 1099-INT.
• Homeowners do not need to issue W-9s unless they work from home, claim the workspace on their taxes as a write-off, and are having work done to their home office.
• This designation sounds complicated but it just applies to single-member LLCs.

For example, you might be a sole proprietor, but for marketing purposes, you don’t use your personal name as your business name; instead, you are “doing business as” some other name. Check the “LLC” box if your business is an LLC with multiple members. Then you must check the box corresponding to your LLC’s tax status. If your LLC has not filed a request to be taxed as a C corporation or an S corporation, the LLC is taxed as a partnership. Check the first box if your business is a sole proprietorship or a single-member LLC.

Several types of individuals and businesses can fill out Form W-9. When beginning to work as either an independent contractor or an employee, you should expect to fill out some paperwork providing your personal identifiable information. The main difference between Form W-9 and Form W-4 is that Form W-9 is for independent contractors and other people who are not employees, while Form W-4 is for more traditional employment relationships.

Sole Proprietors Without an EIN

If you receive an email saying you won a prize for a contest you don’t recall entering, you may not want to give that person a W-9. Otherwise, one option is to use a free online service to encrypt your completed Form W-9 and email it securely to the requester. An unscrupulous or financially struggling employer might try to classify an employee as an independent contractor to save money.

In most cases, corporations and businesses will be exempt from backup withholding. In contrast, if you are an employee, you’ll complete Form W-4 to let your employer know how much money you wish to have withheld from your paycheck for federal income taxes. Form W-9 will have your personal identifiable information and states whether you’re subject to backup withholding.