How to fill out an IRS Form W-9?
As a freelancer, service provider, network marketer, contractor, landlord or anyone providing services and learning commissions – you will most likely be asked to fill out a Form W-9 as part of the initial sign-up when working with a new company. Let’s first discuss the reason that your customer or the company you are providing services/earning commissions from is asking for this information. I mean, it is your personal and confidential information that you don’t want to just be handing out to everyone!
Why do W-9s matter?
The information on the Form W-9 is similar to the information a new employee may fill out and provide to their employer. The company can use this document to verify with the IRS that your name and Social Security Number or Business Identification number match what the IRS has on file. At the end of each year, depending on how YOU are set up as a business, that company may or may not need to issue you a Form 1099 Misc. Again, similar to a W-2 which is the document a company provides an employee at the end of each year showing how much that employee made.
The 1099 shows rents paid, nonemployee compensation (earnings from providing services as a contractor or commissions earned), prizes/awards and a few other very specific situations. The main purpose of the Form 1099 is to report the income earned in these situations to the IRS, who then uses this information to verify all income has been reported on the recipient’s tax return.
In order to properly fill out the Form 1099 at the end of the year any company you work with will need some key pieces of information. The Form W-9 is how they request that information from you the service provider, freelancer, etc.
Let’s break down the specific lines of the form.
Line 1: On this line you should report the name that will match the tax return for where the income will be reported. If you are an individual, that should be the name shown on your social security card. If you are a sole proprietor or single member LLC, meaning you operate under a business name or DBA name, you still enter your individual name on line 1 (and the business name or DBA name on line 2). The reason for that is even though you may operate using a business name, the income is still reported on your personal tax return. The IRS will be looking for that income on your personal return and therefore needs to know your individual name.
If you have multiple owners or have chosen for your Single Member LLC to be taxed as an S Corp, you will report the Partnership name or LLC name on line 1, as those types of businesses file a tax return that would report the income.
Line 2: Can be used to report the business, trade name, DBA name or a disregarded entity name. This can be beneficial to company you are sending invoices to if the invoice name won’t be the name listed on Line 1.
Line 3: While these boxes may seem fairly unimportant they are actually very important to the company you are providing this W-9 to. They will utilize this information to determine whether or not they are required to issue the Form 1099 at the end of the year. If for line 1 you used your individual name because you are an individual, sole proprietor, or single member LLC, you will select that box. If you have a formal legal entity set up (that is NOT an LLC) you will select the appropriate C Corp, S Corp, Partnership, Trust/Estate. For an LLC that has multiple members or has elected to be taxed as an S Corporation, you will select the Limited Liability Company box and enter a C, S, or P on the line to the right side.
Line 4: This is the reason filling out and providing accurate information on the W-9 is important. Without this information a business would need withhold 24% of whatever they pay you.
Lines 5 & 6: Provide the address that the company should use to mail the Form 1099 to at the end of the year.
Part 1: This information will be used along with your name to match the records of the IRS and you want to make sure you are filling in the appropriate box. If you are an individual, you will enter your Social Security Number or (ITIN number if you don’t have a SSN). If you are a sole proprietor that has requested a business EIN from the IRS, you may enter either your SSN or EIN. However, if you are a single member LLC that entered your individual name on line 1, be sure to enter your SSN in Part 1, not the single member LLC EIN. If you selected the Limited Liability Company box in Line 3, then you would enter the business EIN in Part 1.
Part 2: This section certifies that you are a U.S. person or resident alien and should be signed by the individual or the appropriate individual who is signing on behalf of a company.
Hot tips
Going through the Form and filling it out using the information above and saving that copy for your records can be so helpful. Each time you need to provide a W-9, you pull out the version you filled out and send a copy of it to each new company you work with. Just be sure to have an updated version that matches the current IRS form.
You also need be sure to provide updated W-9s if any of the information on the form changes, for example you get married, your address changes, or you are a single member LLC that makes the election to become an S Corp. Providing accurate information on the W-9 can eliminate the need for the company to withhold 24% as a payment sent directly to the IRS.
