A W-9 form is a tax document used to validate a person's identity, address, and TIN for employment or other income-generating activities. The IRS issues this form. Confirmation may be obtained for either a person who is considered a citizen of the United States or a person who is considered a resident alien in the country. Request for Taxpayer Identification Number and Certification form is another name for a W-9 form. This form asks the recipient for their taxpayer identification number.
Who Can File Form W-9?
Confirming a person's TIN is the primary reason a W-9 form is utilized. This form is a formal written request for information only and is used exclusively. An employer or other organization that must submit an informative document with the IRS, such as Form 1099, must get your proper TIN to report any profits or losses that may impact your federal tax return or your taxable income. This requirement applies whether the document in question is needed to be filed electronically or on paper. The Taxpayer Identification Number (TIN) often consists of an individual's Social Security Number (SSN).
In contrast to a W-4 Form, which workers often send to their direct employers, a W-9 does not naturally make arrangements for withholding any taxes owed. This is one of the primary differences between the two forms. Suppose the taxpayer is subject to backup withholding. In that case, it is the holder's obligation of the taxpayer identification number (TIN) shown on the document to pay any taxes due to be paid based on profits connected to the submitted W-9.
What Is The Purpose Of A W-9 Tax Form?
The data collected on a W-9 form is often put to use in the process of developing a 1099 form in some capacity. The information on a 1099 form pertains to the holder of the TIN and includes details on any other sources of income that are not typically included on a W-2.
On the other hand, a W-2 form is not given to independent contractors or unrelated suppliers but solely to workers of a certain firm. This includes, dividends paid against an investment, some real estate transactions, income given to person as part of contract, and a variety of other financial transactions.
Form 1099 only needs to be provided after the minimum income level has been met, which for most forms of supplemental income is set at $600. After this threshold has been reached, the form must be issued. A holder of a TIN is required to record any income that is less than this level, but they are not required to submit a Form 1099 for this income.
Even though workers are legally obligated to provide their employers with some personally identifiable information, an employee's right to privacy is guaranteed by law. There is the potential for civil and criminal action to be taken against an employer who inadvertently reveals an employee's personal information in any manner that was not permitted.
Who Must Complete a W-9 Form?
If a second party intends to make certain kinds of payments, the first party must fill out a Form W-9 and provide it to the second party before the second party may receive those payments. Independent contractors who conduct work for another party but are not employed by that party must fill out a W-9 form. This requirement applies to independent contractors in its broadest sense. Freelancers and other employees working under non-employment frameworks are included in this category.
In some situations, individuals must also submit a W-9 tax form. When opening a new account, a financial institution like a bank or a lending institution may need a W-9 from the customer. This is because interest and dividend payments are reported on Form 1099-INT. Participants in a competition who can win prizes may also be required to fill out a W-9 form since the award amount may constitute taxable income and must be reported to the IRS.
Form 1099 is also used to report payments of mortgage interest, payments made toward student loans, revenues from the sale of real estate, and certain forms of debt that have been discharged. The opposing party may inquire about obtaining a Form W-9 for these documents to ensure that they have all of the necessary information on file.
