A W-9 form is not required for all business transactions. While these are the requirements for when you are required to get a W-9, it is not a bad idea to get one from every vendor. These rules are related to reporting requirements. A requires the information on a W-9 to complete. So the two forms go hand in hand for the vendor-tax relationship lifecycle. After all, you are in business to make money, not just spend it!
When you are a vendor, you should be ready to provide a W-9 on demand. This is where that Dropbox trick comes in handy. To complete a W-9, download a blank copy of the form from the IRS website. The form is updated periodically, so make sure you get the latest version from the IRS to stay compliant. I once sent an old version of form W-9 to a client. I was requested to send an update with the latest version of the form. If you are concerned about giving out your social security number and personal contact information, you can register as a business to avoid sending out personal details.
Either option is equally acceptable, though a registered LLC or S-Corp looks a little more professional on a W-9 than a sole proprietorship. You can use the same form multiple times. Rather than sending off an original make copies, scan a digital version. This will help you send it digitally when requested. That is up to you. Those who fill out Form W-9 must also certify that they are exempt from backup withholding. Because the W-9 also requires a Social Security number or tax ID, it should be guarded carefully to protect from identity theft.
They should also have concerns if they receive a W-9 form from a company for whom they are supposed to be working as a regular employee; the company may be trying to defraud them of benefits they are entitled to by counting them as an independent contractor. If an LLC operates as an independent contractor for other companies, then it too must complete a W-9 form. Under a W-9, the company will not withhold any taxes for you. You are responsible for ensuring the right amount of taxes are paid to the IRS.
It can be a little confusing to differentiate whether you should fill out Form W-9 or Form W-4 based on the actual work performed. A better gauge is the circumstances around the working relationship. Generally, the more control an employer exerts over what a worker does and how they do it, the more likely that person is an employee and not an independent contractor. Another quick way to tell is to determine whether the business aspects of the relationship are controlled by the payer.
That includes how the worker is paid, whether expenses are reimbursed, which party provides tools, supplies, etc. If the employer controls those details, the worker is more likely an employee. If employee benefits are offered, like pension plans, paid vacation, and matching k contributions, the worker is probably an employee. Sometimes an employer might try to save money by classifying an employee as an independent contractor.
Here are a few things to look out for:. Find more tax deductions so you can keep more of the money you earn with TurboTax Self-Employed. Tax Topics for Freelancers, Contractors, and Consultants. What is a IRS Form? Top Tax Write-offs for the Self-Employed.
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