The IRS W9 Form Explained by William Gold
in Finance / Accounting (submitted 2010-03-18)
For those who are independent contractors, as well as for those who work for themselves, a W9 Form is needed to report their Social Security Number or business Tax Identification Number to their clients. This is a pretty cut and dry piece of paper when it comes to government forms. You will simply need to provide your name, your address, as well as your Social Security Number (or your Employer Identification Number, for those who are contractors and are thus considered a separate business entity all their own).
Besides the above information, a W9 will also ask whether you are subject to backup withholding. What is "backup withholding," you might ask. Well, that is withholding at a flat rate of 28 percent on payments made to you or your business under certain circumstances. There are a couple of common reasons for using backup withholding. One reason is if your name and Social Security Number does not match the name and Social Security Number that the IRS has on file for you. Another reason would be if you have outstanding tax debt. In this case the IRS would have notified you that you are subject to mandatory backup withholding until the outstanding tax debt is completely paid for.
During the tax season of the year, contractors will be getting W9 forms to complete. Since during that time of the year, clients are getting ready to send out their 1099 forms. The 1099 Form is used to report self-employment income.
Other places you may be getting a W9 from are brokers and financial institutions. They might ask for a W9 if you will earn interest income, dividends, or trading stocks and other securities. As well as the usual places some people may receive requests for the W9 form from more unusual places like landlords and other people or businesses. This is utilized to ask, officially, from a person or business their name, address, and taxpayer identification number in order for the requesting party to properly issue tax documents to the IRS.
As a general rule, any type of business that requests a W9 Form is one that pays you interest, In general, the types of businesses that request Form W-9 is any business that pays you reportable income. However if you feel that you have received this form from an unusual source you should ask them why they are requesting the form and what they will be using it for.
What about foreign subcontractors? With foreign subcontractors A W9 is not needed, it is only needed to gather information from US persons and businesses. However if you have a foreign contractor that is working for you, they will most likely be required to fill out one of the various W8 Forms.