W9 Form

Contractor with thumbs upThe W9 Form is used to request a Social Security number so a contractor can get paid.  As you probably know, money doesn’t change hands in this country without the IRS getting involved.  If someone hires a contractor to do some work for them, this earned money is to be reported to the IRS.  It must also be reported on income tax returns as income.

The IRS can’t do anything without a Social Security number, so they’ve come up with a special form just for obtaining or supplying a tax id (Social Security) number.  This is used by the person who hired the contractor to report to the IRS what they paid a contractor.  Once it’s time for filing federal income tax returns, the contractor should be reporting that income.  The tax id is what ties it all in and provides the IRS a way to see if contractors are underreporting income.  Here’s a closer look from both the employer’s point of view and the contractor’s point of view.

How to Pay a Contractor

If you or your business hires someone to do some work for you, that person is receiving income.  Income must be reported to the IRS so everyone can pay their fair share of Social Security and Medicare as well as income taxes.  If you pay someone more than $600 in a year then you must issue a 1099 to them and also submit the 1099 to the IRS.

In order to completely fill out the 1099 you must have the contractor’s social security number or tax id.  To request this number and have it on official record, use the W9 Form.

It’s a simple form that consists of basic information about the person or company you hire to perform contract work.  Contract workers are those who are not regular employees of you or your company, they have no withholding taken out of their paycheck from you.

The W9 Form is just name, address, business type, signature and Taxpayer Identification Number (TIN).  For sole proprietors or individuals, this is simply the Social Security Number.  For corporations this is the Employer Identification Number (EIN).

Go directly to the IRS website to download a PDF version of Form W9.  Here’s the link, it’s free.  Don’t be fooled into paying a service for this free form.

If you do end up paying someone more than $600 during the course of the year, you’ll have to issue that 1099 form.  If you use tax preparation software then this should be easy.  The software they use has the 1099 portion built right into the main package.  They’ll actually ask you: “Do you need to issue any 1099 forms this year?”  or..”Did you pay a contractor this year?”

When you submit your income tax return through the software, you can also submit 1099s to the IRS.  Then, you’ll be asked whether you want to print the 1099s too, which are the copies you will send to the person who did contract work for you.

However, if you pay someone less than $600 during the year, no need to report anything via the 1099.  But always print out a W9 form and hand it to someone you’re hiring, right away.  You’re more likely to get the form back in a timely manner if it’s a precondition to starting work and getting paid.  Just get the paperwork out of the way while you have the guy in front of you.  It will be a lot easier in the end.

For Contractors: How to Fill Out the W9 Form

If you are handed a W9 Form by someone you worked for, just fill it out and hand it back to them.  If you run a business, no matter how small it is and how informal it may be, surely you know what tax classification it is…sole proprietor, corporation, partnership, LLC etc.  If you are just performing services as yourself, you are a sole proprietor.  Use your social security number in Part 1 of  Form W9.

If you owe back taxes to the IRS, you may be subject to backup withholding.  In that case, submitting the W9 Form will include your certification that you are subject to backup withholding.  If not, then you are certifying that you are not.