Internal Revenue Service (IRS) Form W-9 is usually used to collect pertinent information about a United States independent contractor or freelancer. This form provides an official way for companies and business people to secure identifying information about the people they pay. Companies use the information they collect when filing required forms with the IRS and providing informational forms to the contractor. A company that hires independent contractors keeps one of these forms on file for each contractor. Sometimes financial institutions that pay interest and dividends use the W-9 form as well.
The right way to use a W-9 form depends on the role of the person who is using it. If a company hires independent contractors or freelancers, it gives a blank copy of the form to each contractor it hires. Once the contractor fills it out and returns it to the company, it is kept in the company's file system. If the contractor relocates or experiences other changes, including a change of business name, he is supposed to complete a new W-9.
If the person using the W-9 form is an independent contractor or freelancer, his job is to complete the form, sign and date it, and return it to the company that requested it. This involves providing his full name as it is listed on his tax return and his official business name, if he uses one. The independent contractor is also supposed to select his business organization type. For example, a person who is the sole owner of his business or a lone freelancer will usually check the individual/sole proprietor box. There are also check-boxes for corporations, partnerships, and limited liability companies.
Next, the contractor provides his complete address and social security number. If he has an Employer Identification Number (EIN), he may provide that instead of a social security number. If the individual is exempt from backup withholding, he will check the box labeled “Exempt Payee” as well.
The next step in completing the W-9 form is signing it. When a person signs this form, he certifies that he is not subject to backup withholding. If a person is subject to backup withholding, the company that pays him money withholds 28 percent of his money on behalf of the IRS. This may occur if there is a discrepancy between the information provided on the form and the records the IRS has. An individual may also have money withheld if he owes back taxes and has been notified that he is subject to backup withholding.