When you go to work for a business as an employee, you must fill out a W-4 form, which helps the employer know how to take the right amount of taxes out of your paycheck. If you're a contractor or vendor, the company you work for or with will ask you to fill out a W-9 form. It's important that you know the difference between the two as your employment status might change during your career.
Providing a W-9 allows a business to correctly issue a 1099 form to you, which you'll need to properly file your taxes. Knowing how to follow IRS W-9 instructions will help you avoid losing potential income streams because clients can't work with you.
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Individual or Entity?
Before you begin filling out a W-9 form, you must determine how you are working for a client. For example, are you working as an individual, such as Joe Smith, or are you doing work as your business, such as Joe Smith & Associates or Artsy Graphic Design?
If you have an LLC, for example, your company might have decided to apply for a federal tax number issued by the IRS, known as an Employer Identification Number, or EIN. If you work as an individual, you will put your personal Social Security number on a W-9 form.
Read More: Form 1040: What's Changed for Your 2020 Tax Return
What Is a W-9 Form?
A W-9 form is a document that provides people and companies that hire you with information such as your name or business name, Social Security number or Employer Identification Number, type of business structure and complete address.
You need to fill out a W-9 not only to receive payments in certain situations, but also to properly record some real estate transactions, claim mortgage interest deductions or execute other transactions.
You can find directions for completing IRS Form W-9 instructions at the IRS website, or fill in and print out a W-9 at the IRS website at this link. If you don't have a software program that lets you fill in the W-9 on your computer or phone, you can print the W-9 on paper, fill in the information and sign it by hand or scan it, then send it back to the party you're working with.
Filling Out the W-9 Form
The W-9 is a very short form and easy to fill out. You'll start by filling in your name as it will appear on your income tax form. This means use your full name (e.g., Steven vs. Steve), middle initial and last name if that's what you'll put on your tax return. If you're filing for your business, use the complete business name, such as Artsy Graphics, LLC or Dave Murrow & Associates, Inc.
Next, you'll check the box that best describes your business. Your choices are:
- Individual/sole proprietor or single-member LLC
- C Corporation
- S Corporation
- Limited Liability Company
If you choose Limited Liability Company, you'll need to fill in your tax classification (C Corporation, S Corporation or Partnership). The IRS form provides qualifications/further instructions for properly filling out the form if you choose Limited Liability Company.
Fill out your complete address, including your street address, city, state and zip code. You have the option to fill in the requestor's name and address, and to list account numbers. Add your Social Security number or Employer Identification Number in the box provided. Sign and date the document.