The title of Form W-9 is formally Request for Taxpayer Identification Number and Certification. Business utilize this form to acquire the Taxpayer Identification Number (TIN) from licensed contractors, suppliers, and freelancers. The form similarly provides other personally recognizing details like your name and address.
The form functions as an arrangement wherein you, as a licensed contractor or freelancer, are accountable for keeping taxes from your earnings. When you’re a full-time worker, your business keeps some of your earnings to cover federal earnings taxes and FICA taxes (which consist of Medicare and Social Security taxes). Firms do not make wherein withholding for licensed contractors.
W9 Form 2020 Free Download
As opposed to what they do for their employees, businesses take on independent contractors differently. Their income taxes are not withheld, and contractors are entitled to pay for their Social Security taxes or Medicare. These responsibilities aren’t the employer’s responsibility. Whatever the case, the IRS needs to know the exact amount these contractors pocketed, to ensure they pay the taxes they deserve to. The 1099-MISC is a vital resource here. It’s used to gather this information. So businesses needn’t send anything to the IRS, not even the Form W-9
When is it best to Fill Out Form W-9.
The sudden arriving of a Form W-9 form for filling should be managed greatly by an independent contractor. Before filling it, the contractor should know whether he/she is legitimately required to do so. Form W-9 is sometimes also used by financial institutions in cases when they need to source information from a customer, to report dividends or interest. A caution here: It’s likely the financial institution already has your tax ID number, obtained the moment you opened your account.
Next, in case the company requesting your Form W-9 is your employer and categorizes you as an employee as opposed to an independent contractor, then there’s a reason to worry. The difference is considerable.