Request for Taxpayer Identification Number (TIN) and Certification

In the event you work as a freelancer or impartial contractor, most of your purchasers ought to ask you to finish Type W-9, Request for Taxpayer Identification Quantity (TIN) and Certification. This kind helps companies obtain key data from their distributors with a view to put together data returns for the IRS. Companies should file data returns utilizing Type 1099-MISC each time they pay a freelancer or impartial contractor a complete of $600 or extra throughout the yr.

Your purchasers will use the data in your W-9 to place your title, enterprise title, deal with, and taxpayer identification quantity (TIN) on the 1099-MISC they file about you. They’ll ship one copy of 1099-MISC to the IRS and one other copy to you in late January, following the tip of the tax yr.

When Type W-9 Is Wanted

You is likely to be requested to fill out a W-9 for quite a lot of causes embody:

• Sure actual property transactions
• Mortgage curiosity paid
• Acquisition or abandonment of secured property
• Cancellation of debt
• Contributions to a person retirement association (IRA)

Type W-9 is used particular to gather tax data from U.S. individuals together with resident aliens. It’s also used to gather data from partnerships, companies, firms, estates, or home trusts.

Find out how to Full Type W-9: Request for Taxpayer Identification Quantity (TIN) and Certification

Type W-9 is without doubt one of the best IRS varieties to finish, but when tax varieties make you nervous, don’t fear. We’ll stroll you thru the correct option to full it.

Step 1: Enter your title as proven in your tax return.

Step 2: Enter what you are promoting title or “disregarded entity” title, if completely different from the title you entered for step 1. For instance, you is likely to be a sole proprietorship, however for advertising and marketing functions, you don’t use your private title as what you are promoting title; as an alternative, you might be “doing enterprise as” another title. You’d enter that title right here. As for the disregarded entity half, should you don’t know what it’s, you most likely aren’t one. The most typical disregarded entity kind is a single-member restricted legal responsibility firm.

Step 3: What kind of enterprise entity are you for federal tax classification: sole proprietorship, partnership, C company, S company, belief/property, restricted legal responsibility firm, or “different”? Verify the suitable field. In the event you’re unsure, you’re most likely a sole proprietorship, since you would have needed to file a whole lot of paperwork to grow to be one of many different entities.

Step 4: Exemptions. Likelihood is you’re going to go away these bins clean. Listed below are a few exceptions: 

1. Payees which can be exempt from backup withholding, reminiscent of companies (usually), may must enter a code within the “Exempt payee code” field. The Type W-9 directions record the exempt payees and their codes and the forms of funds for which these codes needs to be used. Firms filling out a W-9 for receipt of curiosity or dividend funds, for instance, would enter code “5.”

2. Payees which can be exempt from reporting underneath the Overseas Account Tax Compliance Act (FATCA) may must enter a code within the “Exemption from FATCA reporting code” field. Neither of those bins will apply to the standard impartial contractor or freelancer.

Step 5: Present your road deal with, metropolis, state, and zip code. What if your own home deal with is completely different from what you are promoting deal with? Which deal with must you present on Type W-9? Use the deal with that you’ll use in your tax return. For instance, should you’re a sole proprietor who rents workplace house, however you file your tax return utilizing your own home deal with, enter your own home deal with on type W-9 so the IRS gained’t have hassle matching your 1099s together with your Type 1040.

Step 6: On this non-obligatory step, you possibly can present the requester’s title and deal with. You may wish to fill out this field to maintain a file of to whom you offered your tax identification quantity.

Step 7: The IRS calls this part Half I, which has to make you marvel what all these steps you simply accomplished have been. Right here, you need to present what you are promoting’s tax identification quantity, which is able to both be your particular person Social Safety Quantity(SSN) should you’re a sole proprietorship, or your employer identification quantity (EIN) should you’re one other kind of enterprise. Now, some sole proprietorships even have EINs, however the IRS prefers that sole proprietors use their SSNs on type W-9. Once more, doing so will make it simpler to match any 1099s you obtain together with your tax return, which you’ll file underneath your SSN.

What if what you are promoting is new and doesn’t have an EIN? You possibly can nonetheless fill out type W-9. The IRS says it is best to apply in your quantity and write “utilized for” within the house for the TIN. You’ll wish to get this quantity as rapidly as potential as a result of, till you do, you’ll be topic to backup withholding. You possibly can apply for an EIN on the IRS web site. See the directions beneath for Step 8, Half II, for extra on backup withholding.

Step 8: In Half II, you need to attest to the truthfulness of your entire data earlier than you possibly can signal type W-9. Deliberately mendacity on a tax type might imply you’ll should pay a fantastic or go to jail; the IRS doesn’t fiddle. Earlier than signing type W-9, listed below are the statements you need to certify are true, underneath penalty of perjury:

1. The quantity proven on this kind is my right taxpayer identification quantity (or I’m ready for a quantity to be issued to me).

In the event you have been desirous about utilizing a “borrowed,” stolen or made-up tax ID quantity, assume twice earlier than mendacity underneath oath.

2. I’m not topic to backup withholding as a result of: (a) I’m exempt from backup withholding, or (b) I’ve not been notified by the Inside Income Service (IRS) that I’m topic to backup withholding on account of a failure to report all curiosity or dividends, or (c) the IRS has notified me that I’m not topic to backup withholding.

Most taxpayers are exempt from backup withholding. In case you have no thought what the IRS is speaking about right here, you’re most likely exempt. In the event you aren’t exempt, the IRS may have notified you, and the corporate paying you must know as a result of it’s required to withhold earnings tax out of your pay at a flat price of 24% and ship it to the IRS. By the way, now you recognize one other good cause to not cheat in your tax return: You may need to inform a future consumer about it, and which may make the corporate assume twice about you. Merchandise (c) mainly says that should you have been as soon as topic to backup withholding however aren’t anymore, nobody must know.

3. I’m a U.S. citizen or different U.S. particular person.

In the event you’re a resident alien, you’re within the clear. The IRS additionally considers the next to be a “U.S. particular person”: a partnership, company, firm, or affiliation created or organized in america or underneath the legal guidelines of america; a home property; and a home belief. If what you are promoting is a partnership that has a overseas companion, particular guidelines apply; examine them within the directions to type W-9. In the event you aren’t a U.S. citizen, you might must fill out type W-8 or type 8233 as an alternative.

4. The FATCA code(s) entered on this kind (if any) indicating that I’m exempt from FATCA reporting is right.

You most likely gained’t want to fret about this one, which has to do with the Overseas Account Tax Compliance Act (FATCA).

Particular Issues When Submitting Type W-9

Type W-9 tells you to cross out merchandise 2 above in case you have been notified by the IRS that you’re at the moment topic to backup withholding as a result of you will have didn’t report all curiosity and dividends in your tax return.

You could cross out merchandise 2 should you’re filling out Type W-9 in reference to an actual property transaction. Merchandise 2 doesn’t apply on this case, so it doesn’t matter should you’re topic to backup withholding.

Now, should you learn the fantastic print within the W-9 directions fastidiously, it appears to point that most individuals aren’t required to signal this kind in any respect. You’re usually solely required to signal it if the IRS has notified you that you just beforehand offered an incorrect TIN. Technicalities apart, nonetheless, the one who requested you to fill out Type W-9 will most likely take into account it incomplete or invalid should you haven’t signed it, and good luck attempting to persuade them in any other case.

Returning Type W-9

Return your accomplished type W-9 to the enterprise that requested you to fill it out. Ideally, you’ll ship it in particular person to restrict your publicity to identification theft, however this technique usually isn’t sensible. Mail is taken into account comparatively safe. In the event you should e mail the shape, it is best to encrypt each the doc and your e mail message and triple-check that you’ve got the recipient’s right e mail deal with earlier than sending your message. Free providers can be found on-line that can assist you do that, however test their reputations earlier than trusting your paperwork to them.

Substitute Type W-9

The IRS permits taxpayers to create and use their very own Type W-9. This variation is known as a substitute Type W-9. The IRS states the shape have to be considerably just like the official IRS Type W-9, and it should fulfill sure certification necessities. The certifications on the substitute Type W-9 should clearly state that underneath penalties of perjury the entire standards are right:

• The payee’s TIN is right.
• The payee will not be topic to backup withholding as a result of failure to report curiosity and dividend earnings.
• The payee is a U.S. particular person.
• The FATCA code entered on this kind (if any) indicating that the payee is exempt from FATCA reporting is right.

 The IRS permits that customers can present certification directions on a substitute Type W-9 in a fashion just like the official type. This together with exempting reporters from FATCA reporting. Nevertheless, use of the substitute type doesn’t permit utilizing a substitute W-9 for issues unrelated to an authentic W-9 or to suggest {that a} payee is topic to backup withholding except sure unrelated provisions are met.

The Backside Line

Offering correct data in your Type W-9 will assist be certain that funds you obtain – or different transactions that require this kind – are correctly reported to the IRS. In the event you’re uncertain of some objects, reminiscent of the correct classification of what you are promoting, test together with your accountant or one other monetary adviser.