W-9 Forms
Decoding Tax Documents: W-9 Unveiled
What Is a W-9 and Its Purpose?
- Definition: Request for Taxpayer Identification Number and Certification.
- Usage: Employed by those paying non-employees (contractors, freelancers) for income or services.
- Key Function: Gathers tax information, including Tax Identification Number (TIN), to aid in tax reporting.
Who Completes a W-9?
- Initiator: Individual or entity paying for services (e.g., businesses hiring contractors).
- Recipient: Contractors, freelancers, or non-employees earning over $600 without official employment status.
Information Collected by W-9:
- Name
- Business name (if applicable)
- Address
- Taxpayer identification number or social security number
- Type of business (e.g., sole proprietor, S-Corp, C-Corp)
W-9 vs. 1099 Form: Deciphering the Duo
- W-9 Role: Collects personal information from recipients before work initiation.
- 1099 Role: Reports payments made to non-employees (e.g., contractors) to the IRS.
- Filing Requirement: Companies file 1099 forms for contractors, while W-9s aren’t filed with the IRS.
W-9 vs. W-2: Unraveling the Code
- W-9 Purpose: Facilitates tax reporting for non-employee payments.
- W-2 Purpose: Completed by employers for employees, not applicable to non-employees.
Tax Obligations with W-9:
- Tax Calculation: Recipients are responsible for tracking and paying taxes on income reported via W-9.
- Self-Employment Tax: Calculated at 15.3% as of 2022.
Refusing W-9: Backup Withholding
- Option to Refuse: Individuals can decline providing personal information.
- Consequence: Without Taxpayer Identification Number (TIN), businesses may impose backup withholding at a 24% rate.