Who Is Required to Fill out a W-9? The W-9 form must be filled out by self-employed workers such as independent contractors, vendors, freelancers and consultants. This form allows businesses to keep track of their external workforce. As a contractor or freelancer, you may have completed jobs for multiple businesses. By law , you are only obligated to provide a W — 9 to parties that intend to pay you interest, dividends, non-employee compensation, or any other type of reportable income.
If someone unexpected asks for a W — 9 , ask them why they need it. You do not need to complete a new W-9 for every client. Just keep a copy of the completed form on hand, and it will be ready to go in seconds if a new client asks for one.
This instruction can be given orally or in writing. See item 2 of the Certification on Form W You can replace "defined below" with "defined in the instructions" in item 3 of the Certification on Form W-9 when the instructions will not be provided to the payee except upon request.
For more information, see Rev. For interest and dividend payments and certain payments with respect to readily tradable instruments, the payee may return a properly completed, signed Form W-9 to you with "Applied For" written in Part I.
This is an "awaiting-TIN" certificate. The payee has 60 calendar days, from the date you receive this certificate, to provide a TIN. If you do not receive the payee's TIN at that time, you must begin backup withholding on payments.
You also may elect to backup withhold during this day period, after a 7-day grace period, under one of the two alternative rules discussed below. Backup withhold on any reportable payments if the payee makes a withdrawal from the account after the close of 7 business days after you receive the awaiting-TIN certificate.
Treat as reportable payments all cash withdrawals in an amount up to the reportable payments made from the day after you receive the awaiting-TIN certificate to the day of withdrawal. Backup withhold on any reportable payments made to the payee's account, regardless of whether the payee makes any withdrawals, beginning no later than 7 business days after you receive the awaiting-TIN certificate.
The day exemption from backup withholding does not apply to any payment other than interest, dividends, and certain payments relating to readily tradable instruments. Any other reportable payment, such as nonemployee compensation, is subject to backup withholding immediately, even if the payee has applied for and is awaiting a TIN. Even if the payee gives you an awaiting-TIN certificate, you must backup withhold on reportable interest and dividend payments if the payee does not certify, under penalties of perjury, that the payee is not subject to backup withholding.
The following payees are exempt from backup withholding with respect to the payments below, and should enter the corresponding exempt payee code on Form W If the payee failed to enter an exempt payee code, but the classification selected indicates that the payee is exempt, you may accept the classification and treat the payee as exempt unless you have actual knowledge that the classification is not valid.
If the payee is not exempt, you are required to backup withhold on reportable payments if the payee does not provide a TIN in the manner required or does not sign the certification, if required. An organization exempt from tax under section a , any IRA, or a custodial account under section b 7 if the account satisfies the requirements of section f 2 ;. A state, the District of Columbia, a U. A dealer in securities or commodities required to register in the United States, the District of Columbia, or a U.
The following types of payments are exempt from backup withholding as indicated for payees listed in 1 through 13 above. All payees listed in items 1 through 4 and 6 through 11 are exempt.
Also, C corporations are exempt. A person registered under the Investment Advisers Act of who regularly acts as a broker also is exempt. However, the following payments made to a corporation and reportable on Form MISC, Miscellaneous Income, are not exempt from backup withholding. Attorneys' fees also gross proceeds paid to an attorney, reportable under section f.
Payments for services paid by a federal executive agency. See Rev. Payments made in settlement of payment card or third party network transactions. Payments that are not subject to information reporting also are not subject to backup withholding. For details, see sections , A, , , , , A, N, and W and their regulations.
The following payments generally are exempt from backup withholding. Payments to nonresident aliens subject to withholding under section Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner. Payments of interest on obligations issued by individuals. Backup withholding applies to the reportable payment if the payee has not provided a TIN or has provided an incorrect TIN.
Distributions from a pension, annuity, profit-sharing or stock bonus plan, any IRA, an owner-employee plan, or other deferred compensation plan.
Distributions from a medical or health savings account and long-term care benefits. Distribution from qualified tuition programs or Coverdell ESAs. Gambling winnings if regular gambling winnings withholding is required under section q.
However, if regular gambling winnings withholding is not required under section q , backup withholding applies if the payee fails to furnish a TIN. Thus, for example, a U. For details on the FATCA reporting requirements, including specific information regarding which financial institutions are required to report, see sections to and related regulations. See Regulations section 1.
However, you may still rely on an otherwise completed Form W-9 to treat a person as a specified U. Knowing this early on in the relationship can eliminate penalties down the road. Having that information available ahead of time means that the number and business name can be vetted for accuracy before running into potential delays and further penalties during tax season.
Because the W-9 form is a helpful tool that does not need to be filed with the IRS, businesses do have the flexibility of collecting this information while not using the form itself.
W-9 forms are free to download from the IRS. However, businesses do have the option of collecting the information through alternative formats. As long as the business name and type, tax identifier, and certification of information is collected, the means of doing so are up to the discretion of each business. While scanning and attaching these forms through email is an option for getting a completed form, the forms do contain sensitive information and email may not be the most secure.
Especially for vendors who are operating as sole proprietors who use their social security number, giving out that information can feel very uncomfortable. Businesses may also find pushback from vendors that are either new to operating as independent contractors or those that are not filing taxes properly. Not only would that vendor be subject to penalties of perjury, this can be detrimental to a business if they work with a vendor who is not filing taxes.
Routable offers software that supports healthy business-to-business relationships. While obtaining W-9 information is just one step in having a successful vendor management plan, the consequences of not having this W-9 information are far reaching. To help ensure that W-9 forms are collected as soon as possible, Routable software creates the opportunity to collect the information from their W-9 as part of the on-boarding process.
Vendors will always play a role in the day-to-day operations of business. From the independent UX consultant hired to research the efficacy of an interactive website design to the third-party service shop that keeps the delivery fleet running, these entities solve important business needs. And while asking for tax documents can feel awkward at the beginning of a new vendor relationship, it is necessary to lay a foundation of visibility and trust.
Keeping everyone accountable in their tax returns promotes long term vendor engagement and reduces the stress and pressures of tax season. To learn more about how Routable can help you simplify your B2B payments, lower your operation costs, and save time and effort, schedule a demo with us.
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