What’s Form W-9 for?
Form W-9 can be used by businesses to collect tax identity information from contractors who have been paid $600 or more per year.
These are the types of people who may need to complete W-9 forms.
Workers with W-9 status are not subject to income taxes. An independent contractor’s clients will report their payments to the IRS. The worker can then settle at tax time. Note: Independent contractors may have to withhold backup withholding for tax problems. )
Who is required to complete a W-9 Form?
It doesn’t matter if you are asking someone to fill in a W-9 form or filling it yourself, it’s good to know when they apply.
The IRS recommends that businesses request a W-9 form in most cases when they are paying an independent contractor who meets these criteria:
A worker is not an employee.
Payments are part of your business.
The annual payment value is at minimum $600.
Businesses are required to add up the W-9 worker payments and report them to the IRS.
Independent contractors might wonder if Form W-9 is reported to the IRS. You are required to report all income, not only the income earned by large clients. However, once you have a 1099-NEC (which uses information from your W-9), you can be certain that the IRS has all the information about the payments you reported.
Other uses for Form W-9
Although Form W-9 is often used by independent contractors, there are some other circumstances in which a business might request a completed form W-9. These include income from interest, dividend income, and the proceeds of investment sales.
What information can I find on Form W-9
What’s backup withholding?
Businesses must reserve advance taxes for individuals who have experienced tax problems. This includes not reporting interest or dividend income or providing an accurate tax ID.
This is another information that a taxpayer might need to provide on Form W-9.
What is the difference between Form W-9 and Form W-4?
The primary difference between Form W-9 Form W-4 and Form W-9 , is that the former is for independent contractors while the latter is for employees.
Although many of the information collected on these forms is similar, it represents different business relationships. Particularly, Form W-4 asks for information to calculate tax withholding.
For people who work in traditional employer/employee relationships, Form W-2 may be more useful. Employers send the W-2 to employees in order to obtain pay records to be used in tax returns.