Any time businesses hire vendors to complete work, they should request a Form W-9 for their records. Why? When paying this person or business entity over $600, the business will need to file a 1099 Form with the IRS at the end of the tax year.
Employment paperwork can be daunting, with so much personal and tax-related information required, however, the Form W-9 is fairly simple and straightforward!
Let’s dive right in and address all the information needed to fill out Form W-9 accurately!
Basic Information Required on Form W-9
Before we get into the two parts of Form W-9, let’s take a look at the initial information needed.
Whether this form is being completed by an individual or a business, you will need to complete the first seven lines provided, lines 2, 4, and 7 are optional, as they may not apply to you or your business.
Line 1: Name (as it appears on your income tax return)
Line 2: Business name (if this is different from line 1)
On line 3 you should check the bow to indicate if you are an individual, sole proprietor or single-member LLC. If this is the case, your name should be entered on line 1 of the Form.
If your business is taxed as a C-corporation, S-corporation, Partnership, Trust/Estate, check the box accordingly.
If your business is a Limited Liability Company with more than one member, enter one of the following letters to indicate how you are classified by the IRS.
On line 4, business entities can enter codes to indicate any exemptions for both backup withholding and FATCA Reporting (Foreign Account Tax Compliance Act). FATCA Reporting is required of participating foreign financial institutions. These institutions are required to report on account holders that are US residents.
On lines 5 and 6, provide your correct address and if you have any applicable account numbers, list them on line 7.
Form W-9, Part I
Part 1 of the Form W-9 is absolutely crucial. This is the most important part of the form. You must enter your correct Taxpayer Identification Number. If you are an individual taxpayer, this is your social security number. If you are a business entity, this is most likely your Employer Identification Number. If you fail to provide this number, you could become subject to backup withholding.
What is Backup Withholding?
Backup withholding goes into effect when you fail to provide the required Taxpayer Identification Number on the Form W-9. Your payer (the business that requested the W-9) will begin to withhold 24% of your earnings on behalf of the IRS. This can be easily avoided by double-checking to be sure the TIN is correct and signing the Form W-9 to certify that it is correct.
Form W-9, Part II
The second portion of the W-9 tax Form is also crucial. You must certify that the information you are providing with this form is accurate. By signing this form, you are also certifying that you are a US citizen or resident. In addition to providing your signature, you should also date the form.
Need to Request a Form W-9? Choose TaxBandits!
For business owners requesting the Form W-9 from their payees, TaxBandits offers an easy solution. TaxBandits streamlines the entire process by bringing it into this decade.
With TaxBandits, payers can easily request the Form W-9 by providing their payees’ email address. Then, the payee will be emailed with instructions for completing W-9 with TaxBandits, they can fill out and e-sign the form easily.
When your payee submits their form, we will notify you! This allows your business to complete the process as efficiently as possible! You can use all this information to e-file your vendors’ 1099 Forms with TaxBandits at the end of the year!