IRS Form W-9, "Request for Taxpayer Identification Number and Certification," is a standard tax form used in the United States. Businesses and entities use this form to request the correct Taxpayer Identification Number (TIN) from individuals or entities (like independent contractors and freelancers) who are U.S. citizens or tax residents. This form is critical for businesses to accurately report payments made to these individuals to the Internal Revenue Service (IRS), ensuring compliance with U.S. tax laws.
Purpose of Form W-9
- Tax Reporting: Businesses do not withhold taxes from payments to independent contractors as they do for employees. However, they are required to report the amount paid to these contractors to the IRS if it exceeds $600 in a fiscal year. Form W-9 provides the necessary information to do this via Form 1099-NEC.
- Identification and Certification: It collects the contractor's name, address, and TIN, which can be a Social Security Number (SSN) or an Employer Identification Number (EIN), ensuring that the business can accurately report the contractor's earnings.
Why Businesses Need Form W-9
- IRS Compliance: It's a legal requirement for U.S. businesses to report certain types of payments. Having a completed Form W-9 for each contractor ensures they can comply with these reporting obligations.
- Avoidance of Backup Withholding: If a contractor does not provide a TIN, the business might be required to withhold a portion of their payment (currently 24%) for taxes. This is known as backup withholding.
Form W-9 vs. W-8 Series
While U.S. citizens and tax residents complete Form W-9, international contractors who do not fall into these categories must complete forms from the W-8 series (W-8BEN for individuals and W-8BEN-E for entities) to declare their foreign status and claim any applicable tax treaty benefits.
Detailed Instructions for Completing Form W-9
- Box 1: Enter your legal name as it appears on your tax return.
- Box 2: If you have a business name, trade name, or disregarded entity name different from the name in Box 1, enter it here.
- Box 3: Select the federal tax classification of the person or entity listed on the form (e.g., individual/sole proprietor, C Corporation, S Corporation, Partnership, etc.).
- Box 4: Exemptions (codes apply to certain entities, not individuals), generally left blank by individuals.
- Boxes 5 & 6: Enter your address, city, state, and ZIP code.
Part I: Provide your TIN, which will be your SSN if you're an individual or your EIN if you're representing a business.
Part II: Certification - By signing, you're certifying that the information provided is correct and that you're not subject to backup withholding.
Who Needs to Collect and File IRS Form W-9?
- Businesses: Any U.S.-based business paying a U.S. contractor over $600 in a year needs to collect a completed Form W-9 from them.
- Contractors: Independent contractors, freelancers, and other non-employees need to provide a completed Form W-9 to each of their clients in the U.S. who pay them over the threshold.
For employers utilizing Gloroots for global talent engagement, understanding and managing Form W-9 becomes a part of the broader international employment and tax strategy. Properly handling Form W-9 for U.S.-based contractors ensures legal compliance and smooth financial operations. It's an integral part of the administrative responsibilities when engaging with a diverse and global workforce, ensuring that both the employer and the contractor are protected and informed of their tax obligations in the United States.