IRS Form W-9 is typically used by individuals when they are working as a freelancer or independent contractor. It's very similar to the W-4 form that employees complete for an employer to withhold taxes on each paycheck.
When an independent contractor completes a W-9, they state whether they operate as a sole proprietor, a corporation, a partnership, or a limited liability company.
The Internal Revenue Service website explains that you must complete, issue, and file the 1099-NEC form to any contractors that have made over $600 in one tax year.
Here are a few key takeaways:
The W-9 form is for independent contractors and vendors only. There is a clear distinction between independent contractors and actual employees.
An employee works for the company. The company withholds the employer’s income tax, Medicare, and Social Security from the wages earned. Independent contractors work on behalf of the company and don’t have any taxes withheld. Additionally, labor laws do not apply to independent contractors.
You can download a W-9 form from the IRS website. Additionally, you can have your independent contractors fill them out interactively online, then have them print it out.
Because W-9 forms contain sensitive information, it’s important to encourage independent contractors to send their forms securely. It’s essential that this information is kept secure to prevent any threats to identity theft.
Sending a completed W-9 form through email as an attachment is not considered safe and should be discouraged.
The best practice is to make sure you have your independent contractor complete their W-9 as soon as you know they will be working with you. Otherwise, you run the risk of forgetting the form until tax time rolls around.
If, for any reason, you haven’t received a W-9 from a contractor, one way to move the process along is to let them know that you’ll be sending them a 1099-NEC at the end of the tax year, and ask the contractor to fill out their W-9 first.
Disclaimer: Any articles written on this website, including this article, are not to be taken as legal or HR advice. Employment laws are constantly changing and vary by location and industry. You should consult a lawyer or HR expert for guidance. Need HR advice? We can help!