You will usually submit a W-9 form when you engage in most taxable transactions, such as receiving payments for services you provide as an independent contractor, paying interest on your mortgage or even contributing money to your IRA account. The person or entity you are doing business with uses the W-9 to collect some of your personal information, the most important of which is your taxpayer identification number (TIN). If you submit the W-9 as an individual, your TIN is your Social Security number. When it’s for your business, the TIN is your employer identification number, or EIN.
The party the will be paying you is responsible for requesting the W-9 form from you. However, the requester has no obligation to file the W-9 with the IRS. That person must keep the form on file, and use its information to prepare your information returns, such as 1099s and 1098s, and determine whether federal tax withholding is necessary on the payments you receive.
Filling out W-9s
Filling out the form isn't difficult since it only requires a few pieces of basic information. When the W-9 is for a business, enter the business name at the top of the form and check the appropriate box to identity the type of entity. The TIN is entered on part one of the form, and it must be the correct TIN. Part two requires you to certify the information you provided is correct. You must confirm the three statements directly above the signature line. Submit the completed W-9 to the person who requested it from you.
Payments reported on an information return are usually not subject to federal income tax withholding. However, you may be subject to backup withholding if you fail to provide a TIN, or provide one that’s incorrect. If the payer is obligated to withhold, 28 percent of all amounts payable to you are remitted to the IRS.
The IRS TIN Matching program enables Form W-9 requesters to verify TINs with the IRS when the information return they will eventually file is a 1099-B, DIV, INT, K, MISC, OID or PATR. The IRS may penalize W-9 requesters that fail to report a correct TIN on a return.