Many business owners contract outside help from time to time, such as during busy periods or when specific expertise is needed. After the business owner determines that these individuals are independent contractors (also known as freelancers, self-employed, subcontractors) and not employees, the contractor should complete Form W-9, Request for Taxpayer Identification Number (TIN) and Certification. The business owner usually provides this form to the independent contractor. The W-9 form is available on the Internal Revenue Service website.
To complete the form, the contractor should provide their name, business name, address, and tax identification number, and federal tax classification. Individuals may use their Social Security Numbers (SSN), and businesses can use their Federal/Employer Identification Numbers (FEIN or EIN) in the Taxpayer Identification section. Federal tax classification options include Individual, S- Corporation, Partnership, and others.
By signing the Form W-9, the taxpayer certifies three important facts:
- The information is accurate;
- The taxpayer is not subject to backup withholding; and
- The taxpayer is a citizen of the United States or operating as a business organized under the laws of the United States.
Most taxpayers are not subject to backup withholding, but in some situations, the business must withhold a percentage of earned income as federal tax and submit the funds to the IRS. The most common reason for backup withholding is non-payment of federal income taxes.
If the independent contractor is not a U.S. citizen or operating a business under the laws of the United States, the contractor should use Form W-8 for foreign individuals, businesses, and organizations.
The requester does not mail the form to the IRS, but retains the form in their business records to report payments on Form 1099-MISC. A business owner can be penalized if they use the W-9 information in an illegal or inappropriate manner. In addition, the independent contractor may be penalized if they fail to provide the requested information or give incorrect or falsified information.