What Is a W-9 Tax Form?

What Is a W-9 Form?

IRS Form W-9 (Request for Taxpayer Identification Number and Certification) is a document used to collect the name of a person or business, their address and TIN. Businesses often use W-9 forms to collect information from independent contractors, freelancers and other vendors so they can report payments totaling $600 or more to the IRS on a 1099-NEC form.

There are other uses for a W-9 as well. Banks and credit unions use information from W-9s to report interest you receive and mortgage interest you've paid to the IRS. Payment platforms and online marketplaces like Venmo or Etsy may also request W-9s so they can issue 1099-K forms, reporting payments for goods or services made to business users.

Learn more: How Are Freelancers Taxed?

W-9 Form Terms to Know

Here are three terms to understand as you navigate the W-9:

• Taxpayer identification number: For W-9 purposes, your TIN is your employer identification number (EIN) if you're in business, or your Social Security number if you're an individual. If you don't have a Social Security number, you may use an IRS ITIN (individual taxpayer identification number).
• Backup withholding: If you don't certify that you're exempt from withholding (as independent contractors generally are), the IRS may require your client to withhold taxes from your pay at a rate of 24% and remit the money to the IRS.
• Exemptions: Some entities are exempt from backup withholding or Foreign Account Tax Compliance Act (FATCA) reporting, including the U.S. government, corporations, securities or commodities dealers, real estate investment trusts and banks. These exemptions generally don't apply to Individual taxpayers.

Who Is Required to Fill Out a W-9?

Independent contractors, gig workers and self-employed people submit W-9 forms to the companies that pay them. You may also be required to complete a W-9 if you have an interest-bearing bank account, sell a property, experience a foreclosure or receive various kinds of income or payments.

Examples of W-9 Income

Here are some examples of payments that might require a W-9 for IRS reporting purposes:

• Independent contractor pay: Pay you receive from freelancing, gig work or other non-employee work
• Real estate transactions: Proceeds from the sale of a property or, if you're a real estate agent, commissions received
• Mortgage interest: Mortgage interest you've paid is reported to the IRS, so you can claim the mortgage interest deduction
• Acquisition or abandonment of secured property: Foreclosed property may result in taxable income
• Canceled debt: Forgiven debts, which may be considered income
• IRA contributions: Contributions to a tax-advantaged IRA, which may be tax deductible and/or subject to contribution limits
• Interest and dividends: Bank account interest and investment account dividends, both of which are taxable

Tip: If you certify as an independent contractor that you aren't subject to backup withholding, you must report your income and pay taxes on it. To avoid IRS penalties and interest, you may want to make quarterly estimated tax payments.

How to Fill Out a W-9

Completing a W-9 form is relatively short and simple, though the IRS instructions for it are long. Refer to IRS instructions if you have any questions. Otherwise, here are three short steps to filling out a W-9.

1. Enter Your Personal Information

Use your full name (or business name) and address, as you would enter it on your tax return. If you have a business, indicate whether it's a sole proprietorship, C-corp, S-corp, trust or estate, or limited liability corporation (LLC).

2. Input Your Tax Identification Number

In Part I, enter your Social Security number or EIN.

3. Complete the Certification

Under Part II, certify the following information:

1. You've entered the correct taxpayer identification number (or are waiting for a number to be issued).
2. You are not subject to backup withholding.
3. You are a U.S. citizen or resident alien; U.S. partnership, corporation, company or association; U.S. estate; or domestic trust.
4. You have entered the correct FATCA code(s), if you've claimed to be exempt from FATCA reporting.

Cross out item 2 (related to backup withholding) if you've received a prior IRS notification that you are subject to backup withholding or if you are submitting a W-9 in relation to a real estate transaction.

You are not required to sign if you're completing the W-9 for mortgage interest paid, the acquisition or abandonment of secured property, cancellation of debt, IRA contributions or payments other than interest and dividends.

Learn more: 401(k) and IRA Contribution Limits

W-9 Form vs. W-4 Form

W-9 and W-4 forms report similar information, but they're used in different circumstances. W-9s are for independent contractors and other non-employees; W-4s are submitted by employees to their employers.

W-4 forms are also used to calculate withholding from paychecks.

What Happens if I Don't Fill Out a W-9?

If you don't provide your correct TIN and a W-9 that shows you're exempt, your pay will be subject to 24% backup withholding. The IRS also imposes the following penalties:

• $50 each time you fail to furnish a correct TIN when it's requested
• $500 for falsely claiming you're exempt from backup withholding
• Possible fines and imprisonment for falsifying certifications or affirmations

The Bottom Line

The main purpose of submitting a W-9 is to provide your client, financial institution or other payor with taxpayer information, so they can report your income and payments to the IRS correctly. In most cases, this is easy, fast—and your ticket to avoiding backup withholding.

One final caveat: Make sure the company requesting a W-9 is legitimate. Otherwise, you're potentially sending your Social Security number and personal information to a scammer. Companies generally ask for a W-9 at the beginning of a significant work or financial relationship. You should feel comfortable with the other party before taking next steps.