W9 purpose ?
W9 Form aptly named as Request for Taxpayer Identification Number and Certification is for collecting basic information about every freelancer or contractor or self-employed person’s earning an income from another person or entity. So, if you hire a nanny for your child, you must collect information about child-caregiver on W9 form if the total payment is $600 or more. Once, you get a signed W9 form, your obligation of tax withholding and filing the form W9 to IRS remains.
Is a W9 required by law?
The answer is Yes. An entity hiring you as a service provider has a legal obligation to obtain a completed Form W9 from anyone they pay $600 or more to during the year. The information collected through W9 is the basis for filling information returns, such as 1099s and 1098s. The law further provides that entity has to withhold tax on payments made by a person or entity to a contractor or self-employed persons for any job or services if he/she refuses or does not give form w 9. That is the reason, even if you are not a client of an entity, there may be many situations, in which a person can ask you to submit W9 form. So, a bank, a brokerage firm, a lending institution that has cancelled a debt you owe, or the issuer of a prize you have won all might ask because they have also withholding tax responsibility.
Where can I get a free W9 Form?
IRS provides printable w 9 form on its website . You can download the w 9 form pdf from IRS website
Who needs to fill out a w9?
In following situations , IRS requires information reports from party engaged in following types of transaction with you. They are under an obligation to not only file information report containing the correct Taxpayer Identification Number (TIN) of the person who is paid or transacted with , but also make correct withholding tax .
- Any amount paid to a contractor.
- Real estate transactions.
- Mortgage interest you paid.
- Acquisition or abandonment of secured property.
- Cancellation of debt.
- Contributions you made to an IRA
So, they will ask you and it is your obligation to fill W9 and give to the payer. The payer is only responsible for requesting the W-9 form from you and once you submit it to it, they are supposed to keep the form w9 on file, and use the same to prepare information returns, such as 1099s and 1098s, and determine whether federal tax withholding is necessary on the payments you receive.
How does a w9 affect my taxes?
Filing a W9 form without or erroneous identification or TIN may invite backup withholding tax on the payments made to you .The tax rate for withholding is substantial . So, 28 percent of all amounts payable to you maybe withheld and remitted to the IRS in case of non-submission or error in identification number in w9.
Is a new W 9 required each year?
First of all ,filling of Forms W-9 is not an annual affair as it does not expire. As per IRS rule, Forms W-9 are collected from vendors who have appeared for the first time in three calendar years on an IRS “B Notice” list (see Pub. 1281) or on an IRS proposed penalty notice (see Pub. 1586), or when the vendor tells you information has changed
How to submit Form W-9?
There are three ways you can submit form W9.I
- Give it to the requester by hand in person .
- Email form W9 after encrypting it for security to the requester.
- Send it through courier service such as FedEx, UPS, or the postal service.
Which number EIN or SSN should I enter on W9?
- Sole proprietor- enter either one.
- Business as an LLC – use the EIN of LLC.
- Business as a single member LLC-enter Your SSN or EIN and not the entity’s EIN
What if I refuse to fill out Form W-9?
As per IRS rules, you will be subjected to a very high percentage of withholding tax in case you refuse or do not submit the form w-9 to the requester.Since , the entity will have more responsibilities on account of non-submission of W9 by you, you may not be given further business opportunity.
Form W9 & Phishing Scam
While giving a true and correctly filled W-9 is an obligation on your part, you must confirm if the request for form w-9 is not from shady person or entities. That will protect you from identity theft and other phishing scams.For example , beware of following kinds of requests
- an email declaring you as winner of a contest. Do you recall participating in any contest like that ? Do not respond if you don’t recall it .
- An email from the IRS regarding W-9 because the IRS doesn’t initiate contact with taxpayers via email.