There are many types of forms to complete as a business owner. Many of these forms tell the IRS when and if other forms need to be filled out, the type of payments that need to be applied, taxes that you should be withholding and more.
A key form for year-end (and all year long) is Form W-9.
A W-9 is a form used to collect a Taxpayer Identification Number (TIN) or Social Security Number (SSN) from a person or a business. In other words, 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 form from anyone you will pay $600 or more to in a calendar year as a trade or business.
For instance, if your business hires a freelance graphic designer to create your business logo, you will need to collect a W-9 form from them. If you hire a neighborhood kid to mow the lawn at your rental property, you will need to collect a W-9 form from them.
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.
Unsure how to report on independent contractors?
After reading this brief guide, you should have a clearer understanding of “what is a W-9 form?” Now, let’s review best practices for the W-9 form.
The best thing to do is to 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.
Another tip when receiving W-9 forms is to review them as you receive them. Be sure all the required boxes are completed appropriately, and that the taxpayer has signed the form. This will be key if the IRS contacts you regarding incorrect information. Additionally, getting this corrected right away will be 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. Or trying to track down the W-9 form after you have received a notice from the IRS.
Software programs and apps can be used to request and receive 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 is correct.
You can use the e-services site from the IRS to check the 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 through this site.
W-9 tax forms request vendor information and certifies its completeness. It also allows you to prove whether or not 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.