What is a W-9 Form?

December 17, 2020 | Article

By Jillian Robison, CPA

There are many types of forms to fill out as a business owner. Many of these 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.

What is a W-9 Form?
A W-9 form is a form used to collect a taxpayer identification number (TIN) or social security number (SSN) from someone or a business. In other words, it’s the form you use to get account information about paid 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 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. This would happen if the entity filling out the form was a corporation, in most cases.

Unsure how to report on independent contractors?

The 2020 Form W-9 can be accessed from the IRS website. You can also find W-9 instructions there for how to fill out a W-9 form.

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.

Best Practices for W-9
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. 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 appropriately filled out and that the taxpayers sign the forms. This will be key if the IRS sends you a notice 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 your information returns.

There are software programs and apps that will assist you in requesting and receiving W-9 information from your vendors. Additionally, your accounting program may have options to input W-9 data as a backup. 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.

What is a W-9 Form 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. 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.

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