Form W-9: 6 Common Mistakes and How to Avoid Them

The Form W-9 is a critical document business use to gather information about independent contractors, vendors, or other entities. This information is primarily used for tax purposes. Despite its importance, many individuals and businesses need help with errors when completing this form. Here are six common mistakes often made when filling out a W-9 form, offering insights on how to avoid them.

1. Incorrectly Entering the Name in Form W-9

The first field on a W-9 form requires entering your name as shown on your income tax return. Many people must input a business name or a DBA (Doing Business As) name instead of their legal name. Always ensure that the name provided matches precisely with the one on your tax return.

2. Providing the Wrong Taxpayer Identification Number (TIN)

A common yet costly mistake is providing an incorrect or invalid Taxpayer Identification Number. For individuals, this would be your Social Security Number (SSN) and an Employer Identification Number (EIN) for businesses. Any discrepancy between the TIN on your W-9 and what the IRS has on file can result in significant problems, including penalties. If you’re uncertain, it’s always worth double-checking with the IRS.

3. Failure to Indicate the Correct Tax Classification

The tax classification section of the W-9 form is frequently overlooked, causing many to select the wrong status. Remember, your tax classification determines your tax obligations. If you need clarification on your tax classification, it’s advisable to consult with a tax professional to avoid complications.

4. Ignoring Backup Withholding

Some payees are subject to “backup withholding.” If you’ve been notified by the IRS that you’re subject to backup withholding due to underpayment of taxes, you need to mark the checkbox in the ‘backup withholding’ section. Failing to do so can result in penalties.

5. Not Signing the Form W-9

Another common mistake that might seem trivial yet has grave consequences is neglecting to sign the W-9 form. The IRS requires a signature to validate the information on the form. An unsigned form is considered incomplete and can cause delays or potential legal issues.

6. Sending Completed Form W-9 via Email

As a payee, you can submit a completed W-9 form to the payer or broker who requested it. But, ensure that this method is more secure and does not put your sensitive information at risk. If you’re using a fast file transfer service, sending the form by fax or traditional mail is safer.

Avoiding these common mistakes when filling out your W-9 form will save you time and potential headaches. When in doubt, consult with a tax advisor or attorney knowledgeable about tax forms and can provide expert guidance. The critical takeaway is to double-check all information on your W-9 before submitting it. This practice will help ensure you stay in good standing with the IRS and maintain seamless business operations.