W-9 Form: Meaning and How to Fill

IRS Form W-9, also known as a W9, is an Internal Revenue Service (IRS) tax form businesses use to estimate the taxes owed by contract workers in a given tax year — verifying a person’s name, address, and taxpayer identification number (TIN) through it.

In this article, learn how to fill a W9 Form and delve into the what & why of it!

Let’s begin.

What Is Form W-9? 

Meaning of Form W-9 

Form W-9, (also known as a Request for Taxpayer Identification Number and Certification form) is one of the many tax documents required by the IRS to calculate the taxes owed by contract workers in a given tax year. 

It’s a formal request asking for basic information about the contractors, essentially to establish an agreement that the payer won’t be deducting any tax from the payee’s wage and the payees are responsible for it themselves – and must pay their own taxes.

But who exactly needs to fill out a W9? Let’s dig in.

Form W-9 Definition

As per Wikipedia, Form W-9 is a form used in the United States income tax system by a third party who must file an information return with the Internal Revenue Service (IRS). It requests the name, address, and taxpayer identification information of a taxpayer (in the form of a Social Security Number or Employer Identification Number).

Who needs to fill out a W9?  

Form W-9 is required to be filled out by people who aren’t conventionally employed by a company but are making some amount of income from them.

It mandates independent contractors – essentially people who’ve been paid at least 600$ for their services within a tax year and are independent taxpayers themselves.

These individuals range from self-employed independent contractors, freelancers, attorneys, businesses, vendors, and suppliers to nonprofit organizations, partnerships, and gig workers — basically, anyone paid outside an employer/employee relationship.

Form W-9 can also be requested in a few other situations like mortgage interest payments, IRA contributions, student loan interest, dividend income, real estate transactions, and proceeds from investment sales. 

In addition, Form W-9 is used only for U.S. people, and one is considered a U.S. person when:

1. An individual is a U.S. citizen or U.S. resident alien
2. A partnership, corporation, company, or association is created or organized in the United States or under the laws of:

• the United States, 
• An estate (other than a foreign estate), or 
• A domestic trust (as defined in Regulations section 301.7701-7). 

At the end of the year, businesses are expected to clear up their payments to W9 workers, and the vendor, in this case, is required to be sent a Form 1099-MISC to self-report their taxes.

However, the importance of a Form W-9 extends beyond this. Let’s continue this discussion in the next section.

Importance of understanding and completing the W9 form

For full-time employees, employers deduct income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on their employee’s wages.

But for an independent contractor, an employer doesn’t take care of these things. That means they’re responsible for their employer’s share of Social Security and Medicare taxes, and they won’t receive any compensation if they get laid off. 

To report some of this related information to the IRS, independent contractors, freelancers, and other non-employees who received payments are supposed to fill out a Form W-9.

Also, a bank or financial institution relies on the receipt of taxpayer information to properly report Form 1099-INT, 1099-DIV, or 1099-B. 

A taxpayer may also be asked to furnish a Form W-9 to cancel debt, student loans, or real estate transactions.

When requesting a W9, the employing party ensures that–

1. The vendor’s TIN is correct
2. The vendor is not subject to backup withholding
3. The vendor claims exemption from backup withholding if they’re a U.S.-exempt payee
4. As a U.S. person, the vendor’s share of any partnership income from a U.S. trade or business is not subject to any of their foreign partners’ (if any) share of effectively connected income or withholding tax
5. The FATCA code entered on the form indicating that they’re exempt from the FATCA reporting is, legit

Some notable points:

1. An employer can confidently ask to fill out a form other than a W-9 to request the TIN of the payee if it’s substantially similar to the Form W-9.
2. Partnerships in the U.S. must pay a withholding tax under section 1446 on any foreign partners’ share of taxable income.

So, in any case, if an employer doesn’t request Form W-9, the rules under section 1446 require a partnership to presume that a partner is a foreign person and pay the section 1446 withholding tax, which simply means that the employer will be deducting tax from their wage.

Therefore, it becomes even more crucial for U.S. partners to provide Form W-9 to prove their U.S. status and avoid this withholding tax on their share of partnership income.

Key components of the W9 Form 

When required to complete an IRS W-9 form, you may come across several unfamiliar terms. Here’s a list of a few terms with their explanation:

1. Individual: Operating as independent contractors or freelancers, an individual provides goods or services to a company but unlike employees, they’re not officially part of our workforce, and payments are made directly to them rather than to a business entity.

2. Sole Proprietor: When an individual runs a business in a way that there’s no legal distinction between the business and personal assets. Consequently, they bear full personal liability for any business obligations or debts.

3. Corporation: Essentially, it’s a legal person or a group of individuals who have obtained a charter from the state’s Secretary. Corporations encompass a wide spectrum, ranging from large-scale enterprises to smaller ventures.

4. Partnership: Here, two or more individuals or entities collaborate to conduct a business together. Each partner contributes resources, whether financial or in-kind, and they all share in the business’s successes and setbacks. Partnerships can involve various entities, such as individuals, corporations, trusts, or other partnerships, fostering a cooperative approach to enterprise.

5. Limited Liability Company (LLC): A flexible business structure recognized by state law—it can choose different tax classifications (disregarded entity, corporation, or partnership) and can have various members, including individuals, corporations, other LLCs, and foreign entities, with no maximum limit. Some states also allow single-member LLCs—making LLCs a popular choice for many businesses. 

6. Taxpayer Identification Number (TIN): TIN serves as a crucial identifier, functioning as a Social Security number (SSN). For individuals without an SSN, an Individual Taxpayer Identification Number (ITIN) can serve as their TIN. Business entities utilize their Employer Identification Number (EIN) when completing relevant forms.

7. Backup Withholding: This entails deducting a percentage of income from a taxpayer’s payments, which is then remitted to the IRS. Such withholding may be applicable if the taxpayer has not met TIN certification requirements or if there have been past issues with income reporting. Failure to certify TIN and backup withholding status on IRS forms like the W9 can trigger immediate backup withholding.

8. Exemptions: This section pertains solely to certain entities, not individuals. Entities exempted from backup withholding should input the appropriate code as per the Instructions section of the W-9 form. Similarly, entities exempt from FATCA reporting requirements should use the corresponding code provided in the instructions.

Also, a W-9 form has two parts:

• Part I contains identification data about the payee, such as name, address, tax information, and any exemptions
• Part II notes the certification, or the payee’s signature, confirming that the ID info is correct. 

 Let’s discuss a sample W-9 Form in the next section.

Sample W-9 form  

Form W-9 is one of the most straightforward IRS forms to complete, and is just a page long (excluding the instructions).

You can download the updated W-9 Form here.

How to fill out Form W-9 

Here’s a step-by-step process of how to complete a W9 form – for the employed party/vendor:

To begin with — the employing party can fill in its name and address, and can request the payee to fill out the form next.

Line 1: Name

Fill in your full name as mentioned on your tax return here.

Line 2: Business name

Provide your business name, trade name, DBA name, or disregarded entity name here. If you do not have a business, you are supposed to leave this line blank.

Line 3: Federal tax classification

Line 3a: Provide your business entity, that is, how you are classified based on the federal tax classifications: 

• LLC
• Sole proprietorship
• C corporation
• S corporation
• Partnership
• Trust/estate
• Other

The Limited liability company box is for a Partnership or LLC business with multiple members. 

1. Check the box if you own an LLC treated as a partnership for federal taxes (write “P” next to it).
2. Check the box if you own an LLC that filed Form 8832 or 2553 and is taxed as a corporation (write “C” or “S” next to it depending on the type).
3. Check the box if you own an LLC whose owner is another LLC not disregarded for federal tax purposes (write the appropriate letter next to it. 

Line 3b: If on Line 3a, you checked “Partnership” or “Trust/estate,” or If your LLC has not filed a request to be taxed as a C or S corporation, it is taxed as a Partnership, so you’ll check the 3b box accordingly.

Line 4: Exemptions

Individuals can skip this section; it’s mainly for certain businesses or entities eligible for exemption. If this applies to you, you’ll need to provide a number or letter code that indicates that reason. If your entity qualifies for exemption from backup withholding, put your code on the first line. 

If you’re exempt from reporting under the Foreign Account Tax Compliance Act (FATCA) because your accounts are outside the U.S., jot down your code on the second line. If your accounts are in the U.S., you can either leave it blank or write “N/A.”

Lines 5 & 6: Address, city, state, and ZIP code

Line 5 requires the address (number, street, and apartment) used on your tax return, where IR information can be mailed to you. The following line, Line 6, requires you to enter the city, state, and ZIP code of that address.

Line 7: Account number(s)

This is an optional line where you can fill in the account numbers of your City Parish vendors, for your employers to reach out, in case. 

Part I

In this part, you are required to provide your TIN. Most independent contractors, freelancers, and similar workers use their Social Security Number (SSN) as a TIN. 

In case your business is different and is other than a sole proprietorship, you can input your employer identification number here.

Part II

This component requires you to confirm that the information included on the form is accurate and that you are a U.S. citizen or other U.S. person – as mentioned on the form. 

You’ll then be required to provide your signature and the date when the form is completed.

There are some things an individual needs to keep in mind while filling up a W-9 Form. Let’s discuss them in the next section.

Special considerations when filing Form W-9 

Here are some considerations you should adhere to while filling out a Form W-9:

• Ensure that the name matches the name on the tax information section in the request form.
• Ensure that only one box is checked in the federal tax classification of the entity/individual space. The classification should be consistent. 
• If the person mentioned on Line 1 is exempt from backup withholding and/or FATCA reporting—an applicable code(s) should be reported on Line 4. 
• Ensure the address is complete and accurate. Typically, it should be a U.S. address with a ZIP code.
• One should be filling up the social security number (“SSN”) as an individual and for an entity, one should be filling in their employer identification number (“EIN”). Both SSN and EIN are supposed to be 9-digit numbers.
• Ensure the form is complete by checking that it is signed and dated.

Also, people often get confused with the Form W-4 and Form W-9. Let’s understand their key distinctions in the next section.

Form W-9 vs. Form W-4 

To put it broadly, Form W-4 is supposed to be filled by newly full-time employees while Form W-9 is for independent contractors.

A W-4 form requires some of the same information as a W-9, like an individual’s name, address, and Social Security number, but there are some notable differences. Let’s take a closer look:

Now that you know the key differences between Form W-9 and Form W-4 – let’s see what changes have been introduced in Form W-9 for the year 2024:

W9 Form 2023 vs W9 Form 2024 

On March 6, 2024, the Internal Revenue Service released an updated and finalized Form W-9, with a revision date of March 2024.

The latest finalized version incorporates the new line 3b and updated line 1 and line 3a information for single-member LLCs and other disregarded entities.

Prior, Line 1 (W9 Form 2023) used to request simply “Name (as shown on your income tax return),” which was confusing for some disregarded entities.

Current Line 1(W9 Form 2024) instructs taxpayers to provide the “Name of entity/individual” and “For a sole proprietor or disregarded entity, enter the owner’s name on line 1, and enter the business/disregarded entity’s name on line 2.”

In W-9 Form 2023, line 3 (now line 3a) provided a checkbox labeled “Individual/sole proprietor or single-member LLC.”

In W-9 Form 2024, line 3a changes that label to “Individual/sole proprietor” while also adding a note that “A disregarded entity should instead check the appropriate box for the tax classification of its owner.”

In W-9 2023, The checkbox for LLCs also notes that the LLC box should be checked if the LLC is treated as a partnership, C corporation, or S corporation.

In the W-9 2024 Form, it adds that an LLC that is disregarded should not check the LLC box, and instead should check the box for the classification of the LLC’s owner, using the same rule mentioned above for disregarded entities.

The instructions have been edited to remove all references to single-member LLCs, instead referring either to regarded LLCs or disregarded entities.

Note, however, that the instructions for Part I still state that a single-member LLC that is treated as a disregarded entity must provide the owner’s tax identification number (TIN), not the entity’s TIN.

In the W-9 2024, the new line 3b instruction has been updated to account for LLCs that are treated as partnerships.

Also, the instructions attached to the form now include a warning that failure to complete line 3b could result in the filer not receiving the information necessary to file a correct information return with the IRS.

However, neither the final Form W-9 nor the draft instructions refer to any requirement to use the new version of the Form W-9.

Wrapping up 

The W-9 form is one crucial element in the U.S. tax system – helping with correct reporting and taxation of income earned by Individual contractors or people not employed by a company on a full-time basis – easing out and justifying the taxes for both the payer and payee involved. 

Frequently Asked Questions (FAQs)

1. What Is Form W-9 Used for? 

A W-9 form is an Internal Revenue Service (IRS) tax form essentially used to confirm a person’s name, address, and taxpayer identification number (TIN) for employment or other income-generating purposes.

2. Who needs to fill out a W-9 form? 

Form W-9 is required to be filled out by independent contractors – people who’ve been paid at least 600$ for their services within a tax year and are independent taxpayers themselves.

3. What happens if I refuse to fill out a W-9 form? 

The IRS has outlined several penalties for failure to furnish the requirements of Form W-9. For example, failing to provide a correct tax number — the taxpayer becomes subject to a $50 fine for non-compliance with tax law and regulation, etc.

4. Can I provide a W–9 form electronically? 

The contract worker can sign a W-9 with an electronic signature and send it back to the employer digitally – saving time for both parties. Documents can be signed from anywhere, on mobile or desktop.

5. Is a W-9 Used for Self-Employed Individuals? 

W-9 Form is used for U.S. people who are self-employed independent contractors including freelancers, attorneys, businesses, vendors, suppliers, nonprofit organizations, partnerships, U.S. trusts, heirs of domestic estates, etc.

6. Is the W-9 Form the same for all the states in the US? 

Yes,  the W-9 Form is the same for all the states in the U.S. Given that one is:

• An individual is a U.S. citizen or U.S. resident alien
• A partnership, corporation, company, or association held in the United States or under the laws of the United States, an estate (other than a foreign estate), or a domestic trust (as defined in Regulations section 301.7701-7).