If you are hired as a contractor or freelancer for a business, they may request that you fill out a form W-9.
What is a W9 form used for?
This tax form collects information from you, independent contractor or freelancer, for the business that will be making payments to you. Since an independent contractor or freelancer is not a full time employee, form W-9 allows the business who is making the payments to record transactions to be later reported to the IRS. Not only will the payments be reported to the IRS, they will also be reported back to the independent contractor or freelancer using form 1099-NEC. This is a great way to keep accurate records of payments received.
Who needs to complete Form W-9?
Generally speaking, if you are doing work with a company (and you’re aren’t a full or part- time employee) and expect to be paid more than $600 by that particular client by the end of the year then you will need to complete a W-9. You can find the form here. Here is a step by step guide on how to complete it:
How to fill out the W-9 form:
- In box 1, if you are a sole proprietor or single member LLC, you will enter your name here. If you are a partnership, C Corporation or S Corporation, you will enter the business name on line 1.
- In box 2, if you are a sole proprietor or single member LLC and you have a business name, you can enter it on this line. If you are a partnership, C corporation or S Corporation, you can provide your business name.
- In box 3, check the box that best describes you and your business structure.
- In box 4, this is normally left blank if you are an individual. This box is used for certain businesses and organizations that are exempt from backup withholding.
- In box 5 and 6, you will fill out your address. Please note that this should be the address that you want your 1099-NEC mailed to for tax reporting purposes.
- In box 7, there is an option to fill out an account number. This is used if the business requests or gives you an account number. Normally you can leave this blank.
After you have completed these boxes, you will move down to Part I and Part II of the form.
- In Part I, if you are sole proprietor or single member LLC, you will enter your social security number. As a sole proprietor, you can add either your social security number or your employer identification number (EIN). If you are a partnership, C corporation or S corporation you will add your employer identification number (EIN).
- In Part II, you will sign and date the form. You will want to read through the certification as you are signing and certifying under penalties or perjury that this form is completed with candor.
There are some common mistakes that people make when filling out tax forms. You should always double check for errors before submitting a tax form.
- Misspelling names. Make sure that your name and business name, if applicable, are spelled correctly and appear the same way they do on all tax reporting documents
- Forgetting to include the business on the form. An example would be adding your name, but not adding in your LLC name on line 2 when completing the form.
- Inaccurate information. Make sure that you provide the most accurate and up to date information. Otherwise, the IRS may require a corrected W-9 which could require additional costs and time.
- Not selecting the type of LLC in Box 3. If you select Limited Liability company (and not individual/sole proprietor or single member LLC) it is important to classify the LLC in the box provided.
What if I don’t want to submit a W9?
It is the responsibility of the business to request a W-9 form from independent contractors and freelancers. You should still ensure that you request one and complete it for accurate tax reporting purposes. If you refuse to complete a form W-9 once a business has requested you to do so, you may be subject to backup withholding of 24%.
As a final note, as an independent contractor or freelancer, you will want to ensure that all businesses that you do work for are legitimate. Providing personal information is sensitive, so you will want to verify that the business is legitimate before providing any personal information. Check out our blog post on tax saving strategies for 2022.
Need some support with your wealth journey as an independent contractor or freelancer? Schedule a free intro call with our money coach Anna, where we’ll share how the membership works and give you an opportunity to ask questions.