What is a W-9 Form and How Do You Complete It?

As a business owner, you’re responsible for completing many forms at year-end. These forms are critical to the IRS and help them determine if additional forms are needed, the type of payments that need to be applied, taxes that you should be withholding, and more.

Form W-9 is a crucial part of year-end for business owners and independent contractors to ensure proper compliance with tax reporting. Understanding a W-9 form is foundational in recognizing its role in tax documentation. Equally important is knowing the purpose of a W-9 as it directly impacts how you report income to the IRS. Being adept in how to fill out and read a W-9 form ensures accuracy in your submissions and adherence to IRS expectations.

Since a W-9 form is such an essential part of your tax return, you need to know the conditions when it’s needed and how its status changes depending on your situation. To help simplify your year-end process, we’ve outlined everything to know about Form W-9, including a clear definition of form W-9, an explanation of the W-9 form's purpose, and its specific applications and best practices.

What to Know About Form W-9

The Form W-9 is sent to vendors for completion and is used to collect all the relevant information necessary to determine if a Form 1099 will be required to be filed, assuming the amounts paid are over the filing requirements for each type of Form 1099 required.

A key aspect of the W-9 is that it requires businesses to collect taxpayer documents for the purpose of accurate reporting. Simply put, it’s the form you use to get account information about vendors, independent contractors, sole proprietors, or freelancers. The general rule is that you will need to request a W-9 from anyone you will pay $600 or more to in a calendar year as a trade or business.

Here are two examples of when Form W-9 is needed:

• Your business hires a freelance graphic designer to create your business logo.
• You hire a neighborhood kid to mow the lawn at your rental property.

Ultimately, Form W-9 helps businesses identify which vendors require the submission of information returns. This means it can also be used as proof that you do not need to file an information return. In most cases, this would occur if the entity filling out the form was a corporation or a nonprofit organization.

Form W-9: Frequently Asked Questions

What is a Form W-9 used for?

When discussing what is a W-9 tax form, it’s important to note what information it tracks and how it helps vendors do business.

So, what is a W-9 used for? Form W-9 requests vendor information and certifies its completeness. It also allows you to prove whether you need to provide information returns for those vendors each year. This information is vital to your financial reporting.

Now that you know the answer to “What is a W-9 form?”, the best advice we can give is to collect W-9s early and often. It’s also vital to review the forms immediately as you receive them so you can contact vendors quickly after receipt for any additional required information. Doing so will ensure you are safe from penalties and are reporting all payments to the government in the correct manner.

What information is required on Form W-9?

A W-9 contains essential tax identification information from individuals and businesses and helps assess the necessary amount of W-9 taxes that need to be paid. When you report taxes in the United States, utilizing the W-9 form is essential to guarantee that all critical information about the vendor is presented in a consistent and appropriate format. This ensures that the data aligns with the standards set by the IRS, facilitating accurate and efficient tax reporting.

These are the primary sections on Form W-9:

• Name: List the name of the taxpayer. It must be written correctly in order to meet the requirements of the IRS. The vendor must write their full legal name.
• Business Name: If filing as a business, DBA name, trade name, or disregarded entity name, list that information here. (This section does not apply to individuals.)
• Address: The W-9 form must also include the current address of the vendor, including number, street, and apartment or suite number, as well as the city, state, and ZIP code.
• Taxpayer Identification Number: If the name on line one is an individual, the vendor should provide their Social Security Number (SSN). If the name on line one is an entity, they should provide their Employer Identification Number (EIN). If an individual is a resident alien and not eligible for an SSN, they should use their IRS individual taxpayer identification number (ITIN).
• Federal Tax Classification: In this section, the taxpayer must designate themselves as an individual/sole proprietor, C corporation, S corporation, partnership, trust/estate, LLC (with additional classification required), or other (with additional information required).
• Exemptions: Only specific businesses or entities will need to fill out the exemptions section. If a business or entity is exempt from backup withholding, they will need to list their code here.
• Certification: A W-9 form must be signed and dated to be considered complete. Keep in mind that this is a legal document, so all information must be accurate.

Who needs to complete Form W-9?

A W-9 should be completed by all independent contractors, consultants, or freelancers who are not otherwise classified as an employee. The form is needed for the payer to file state and federal income taxes. You are allowed to request that the form be completed before your first payment is made.

Does a W-9 need to be updated annually?

Generally, a W-9 needs to be updated only if there are changes to a vendor's personal or business information. This includes changes to federal tax classification, address, and tax identification number (TIN).

Best Practices for Completing Form W-9

Contact your vendor and request a Form W-9 before you make your first payment.

This ensures completion and certification of the form, which you need as a business owner for tax purposes. While the form doesn’t change that often, it’s good practice to request an updated Form W-9 annually, or as you notice a change in vendor information. This process ensures you will have the most up-to-date information.

Review Form W-9s as you receive them.

Make sure all the required boxes are completed and the taxpayer has signed the form. This will be key if the IRS contacts you regarding incorrect information. Additionally, getting this corrected right away is easier than trying to track down a new W-9 in January of the following year, when you are rushing to prepare all of your information returns (and so is the vendor you are requesting information from.)

Streamline your processes with digital solutions.

Software programs and apps can be used to request taxpayer identification for individuals and businesses as well as aid in the collection of W-9 information from your vendors. Additionally, your accounting program may have options to input W-9 data for storage and recovery. These systems may also allow you to run reports and identify missing information.

Tackling this list monthly or quarterly makes this task simpler and less overwhelming than reviewing it annually. Similar programs and apps can be used to file your information returns at year-end, but only if your W-9 information has the correct taxpayer identification number and other pertinent details.

You can use the IRS e-services to check the individual TIN of a vendor. If you receive information that you are unsure about from a vendor, you can verify that the TIN matches their name here.

Here to Make Your Year-End a Success

Form W-9 is essential for year-end tax compliance by business owners and independent contractors. A thorough understanding of the form and requirements is critical to proper reporting and a successful year-end.

The IRS W-9 Form, revised in March of 2024, can be accessed on the IRS website and you can find instructions here.

If you need help, Eide Bailly’s experienced certified public accountants and business advisors are here to provide you with the support you need at year-end and all year long.