When you begin a new job, there are often a variety of onboarding forms you are asked to complete prior to your first day of work. If you are a self-employed contractor, Form W-9 will likely be among your pre-employment paperwork. Independent contractors use the W-9 to document tax information and withholding obligations with their new employer or client. Continue reading to understand when you need to complete a W-9 and how it impacts your tax returns.
What is the W-9 Form used for?
Form W-9 is a request for tax identification and certification of a self-employed contractor. If you are a freelance worker, independent contractor, or gig worker, the company you are doing business with will request that you complete Form W-9. This form is typically completed prior to the beginning of your employment. The information on Form W-9 allows the payor to verify your tax information with the IRS and certify you are not subject to backup withholding.
The company will use your Form W-9 to accurately report income paid to you, like wages, interest, or dividends. At the end of the year, your employer with report your total payments and any withheld income for taxes on a 1099-NEC.
Who requests a completed Form W-9?
The business or person paying you will request you to complete a W-9 Form. The paying company is responsible for reporting their payments to the IRS. The company will keep your W-9 on file and use it to generate your 1099 tax forms at the end of the year.
When should you ask for Form W-9?
If you engage in business with a vendor or independent contractor, who you will pay more than $600 during the year, you should request they complete a Form W-9. This form will document the contractor’s name and Tax Identification Number (TIN) and allow you to verify if withholding tax should be deducted.
Keeping a W-9 on file is a good practice, even if the contractor is exempt from backup withholding. The IRS recommends keeping Form W-9 on file for up to four years after payments are made.
When should I not fill out a W-9?
Completing a Form W-9 is not always a prerequisite for employment. There are instances where Form W-9 does not need to be completed.
You should not be asked to complete a W-9 if you are a full-time employee. Form W-9 is designed specifically for independent contractors. If you are hired as a full-time employee, your employer will ask you to fill out Form W-4 instead.
Additionally, depending on the total amount you are expected to be paid, you may not be required to complete Form W-9. For example, by tax law, W-9s are only required for business-to-business relationships where more than $600 is paid during the calendar year. Therefore, if a payor expects to pay you less than $600 during the year, they may not request you complete Form W-9.
That being said, it is a good idea to have the form completed and on file if you are compensated more than $600, and they need to provide you with a 1099-NEC.
Why did my employer give me a W-9 instead of a W-4?
When a business or individual hires you, you will likely complete Form W-4 or W-9. Both forms provide the payor with important tax information required to document payments made to you throughout the year.
Whether you are asked to complete a W-4 vs. a W-9 depends on your employment status. If you are a full-time employee, you will be asked to complete a W-4. Your employer uses the IRS Form W-4 to obtain your name, tax identification number, and information on the amount of your paycheck to withhold for taxes.
However, if your employer requests you to complete a W-9, you are classified as a self-employed independent contractor. As a self-employed taxpayer, you will be responsible for paying self-employment tax, your portion of the FICA tax. Therefore, it’s important to make sure you are filling out the correct form, as it will impact how much is withheld from your paychecks. If you should have received a W-4 instead of a W-9, check with your employer to avoid an unexpected tax bill.
What’s the difference between a W-4 and a W-9?
Although named similarly, the W-4 and W-9 are completely different tax forms. The W-9 (and W-4) are considered input forms. Input forms are the forms you fill out and provide at the beginning of your employment. This informs the employer (or payer) of how much of your income should be withheld for the IRS.
Conversely, the W-2 (and 1099) are considered output forms. Output forms are provided to you and report income and withheld money for taxes accumulated throughout the year. These are the forms you will use to file your tax returns.
|Type of Employee
|Input Tax Form You Complete
|Output Tax Form You Receive