Taxation in the United States is sophisticated compared to other countries. The Internal Revenue Service has designed policies in a way that each detail of a business, corporation, or personal expenditure is listed in detail. This comprehensive approach ensures that all financial activities are accounted for under specific tax regulations.
The IRS mandates the completion of a variety of forms for every detail. One of those is the W-9 form, which is used to understand the basic information about a taxpayer. This form serves as a fundamental tool for the authorities to gather important tax-related information. For example, if you are in a job, then the employer will ask you to fill out the form to acknowledge the income. Without a Form W-9, the payer may withhold a portion of the payment, which is also known as backup withholding.
There are many more details to know about the W-9 form. Allow us to explain to you from this article.
Contents
- 1 W-9 Form: Overview
- 1.1 What is a W-9 Form?
- 1.2 Who Can File and How to Fill it Out?
- 1.3 How to Fill Out a W-9 Form?
- 1.4 What are the Uses of Form W-9?
- 1.5 FAQs
- 1.6 Why is it Important to Fill Out Form W-9?
- 1.7 Why do I need to mention the Address?
- 1.8 What if I do not submit Form W-9?
- 1.9 Who Needs to Fill Out Form 1099?
- 1.10 Where to Find Relevant Information?
W-9 Form: Overview
| Article On | What is a W-9 Form? |
| Country | United States |
| Department | Internal Revenue Service |
| Form | W-9 |
| Purpose | To know tax information |
| Official Website | irs.gov |
What is a W-9 Form?
The form provides information about the transactions, debts, income, IRA contributions, and abandonment of secured property. The form contains the tax information number, which contains the social security number or the employer identification number. The second part is to mention penalties, debt, or unclaimed/claimed property.
General instructions are also provided in the form for the ease of the taxpayers. It is important to submit this form. After completing this form, the taxpayers need to submit Form 1099 as well. In simpler terms, the employer or owner who is paying you needs to know the specific details about the income.
Who Can File and How to Fill it Out?
The form is titled ‘Request for Taxpayer Identification Number (TIN)’, which has two main purposes. The first is to provide TIN, and the second is to certify that all the information mentioned in the form is accurate. The primary users of this form are self-employed individuals, independent contractors, consultants, and freelancers. The form details the total money paid. However, the form can also be used in other situations, such as:
- For real estate transactions
- Debt cancellation process
- Paid mortgage interest rate
- Dividends
- And to make IRS contributions
Kindly note that this form is only for permanent residents. For foreigners, there is a different form, which is W-8BEN or W-8BEN-E. The person/business is known as a requester, and those who are providing the details are known as the payee.
How to Fill Out a W-9 Form?
Accuracy is paramount to avoid complications such as withholding. The taxpayers should always fill out the latest version of the form, which can be found on the IRS website.
Step 1: For a Federal tax return, individuals who pay personal tax have to enter their own name. If they have a business, partnership, or similar entity, then they have to provide a legal name. The next is to provide the accurate address in two lines. This detail is important because the requester sends Form 1099 to this address at the end of the year.
Step 2: In this section, mention the Federal tax classification, whether a corporation, real estate, etc. Specific details have to be mentioned for the proper income, assets, or similar.
Step 3: Include exemptions (if any). If there are no exemptions, then skip this step.
Step 4: The most important one is entering the Taxpayer Identification Number, which is effectively the Social Security Number.
Step 5: In this part, the payee has to make their signature on the form and add the current date. While doing this, the payee must check the entered details to confirm that everything is accurate.
After finishing off with the form, make sure to keep a copy of it for future use. This form can also be used to fill out Form 1099, so you must keep this copy safe.
What are the Uses of Form W-9?
Understanding Form W-9 is crucial for taxpayers because it is related to tax information. The purpose of this form is to know the income details of a non-employee. A person or business makes multiple transactions.
W-9 helps to calculate the income thresholds, which are useful for filing a tax return. Another prominent use of this form is that the employer cannot disclose the personal information of an employee. If it happens, then there are penalties to impose.
FAQs
Why is it Important to Fill Out Form W-9?
The form provides the tax information of a person to the Internal Revenue Service.
Why do I need to mention the Address?
The taxpayers have to fill out Form 1099 at the year end which is sent by the requester. That person needs an address to send this form.
What if I do not submit Form W-9?
The taxpayer will be charged with 24% withholding tax.
Who Needs to Fill Out Form 1099?
Independent contractors, freelancers, businesses, and corporations.
Where to Find Relevant Information?
The taxpayers can check the latest details on the official website of Internal Revenue Service.