For those who are independent contractors, as well as for those that work for themselves, a W9 Form is needed to report their Social Security Number or Business Tax Identification Number to their customers. This is a pretty cut and dry scrap of paper when it comes to government forms. You may just need to provide your name, your address, as well as your Social Security Number (or your Employer Identification Number, for people that are contractors and are thus considered a new business entity all their own).
Besides the above info, an IRS W9 Form will also ask whether you are subject to backup withholding. What’s “backup withholding,” you might ask. Well, that’s withholding at a fixed rate of 28 % on payments made to you or your business under certain circumstances. There are two common reasons for using backup withholding. One explanation is if your name and Social Security Number does not match the name and Social Security Number the IRS has on file for you. Another reason would be if you have outstanding tax debt. In this example the IRS would have told you that you are subject to compulsory backup withholding until the outstanding tax debt is completely paid for.
During the tax season of the year, contractors will be getting W9 forms to finish. Since during that time of the year, clients are preparing to send out their 1099 forms. The 1099 Form is used to report self-employment earnings.
Other places you may be getting a W9 from are brokers and financial institutions. They might ask for a W9 if you may earn interest income, dividends, or trading stocks and other instruments. As well as the common places a few of the people may receive requests for the W9 form from more strange places such as owners and other people or companies. This is utilized to ask, officially, from someone or business their name, address, and taxpayer identification number for the requesting party to correctly issue tax documents to the IRS.
As a general rule, any kind of business that requests a W9 Form is one that pays you interest, in general, the types of enterprises that request Form W-9 is any business that pays you reportable revenue. However if you happen to feel that you have received this form from a unusual source you must ask them why they’re asking for the form and what they will be using it for.
What about foreign subcontractors? With foreign contractors A W9 isn’t required, it is only needed to gather information from US persons and firms. However if you’ve a foreign contractor that is working for you, they will most probably be required to fill out one of the various W8 Forms.
