If you operate as independent contractor or freelancer, most customers should require you to file Form W-9, Request for TIN, and Certification. To file information returns for the Internal Revenue Service, firms may use this form to collect important information from their suppliers. Whenever a business pays independent contractor or freelancer total of $600 or more during the year, the business is required to submit information returns using Form 1099-MISC.

To fill out Form 1099-MISC, your clients will use the data provided on Form W-9, including your name, business name, address, and TIN. At the end of the tax year, in late January, they will give you and the IRS a copy of form 1099-MISC.

When Form W-9 Is Needed

There are a lot of reasons why you could be requested to complete a W-9, including the following:

• Some real estate transactions
• Mortgage interest paid
• Purchasing or giving up a piece of secured property
• Debt cancellation
• Contributions to IRA

Form W-9 gathers tax information from U.S. people, including resident aliens. In addition to this, it may be used to gather data from partnerships, corporations, firms, estates, and domestic trusts.

How to Fill Out Form W-9

Although completing Form W-9, one of the simplest documents required by the IRS, may make you anxious; there is no need to be concerned. We will guide you through the steps necessary to finish it correctly.

Step 1:

Enter your name exactly as it appears on your tax return.

Step 2:

If the name you provided for step 1 was different from the name you supplied for this step, enter the name of your company or the name of the "disregarded entity." For instance, you could be a sole proprietor, but to avoid confusion with potential customers, you might not refer to your name when referring to your company; rather, you can say that you are "doing business as" a different name. You would input that name here. About the statement about the ignored entity, you probably aren't one if you don't know what it is. A single-member limited liability corporation is the sort of entity most often ignored.

Step 3:

Which of the following best describes your firm for federal tax purposes: sole proprietorship, partnership, C corporation, S corporation, trust or estate, limited liability company, or "other"? Tick the relevant box. If you are unsure of your business structure, you are likely operating as a sole proprietorship since becoming one of the other businesses would require you to submit a significant amount of paperwork.

Step 4:

Exemptions. There is a good chance that you will not fill up any of these boxes.

Step 5:

Please give us your home address, city, state, and zip code. What if your home address is different from your company address? Which address should you provide on Form W-9? Enter the address that will appear on your tax return. If you are a single proprietor who leases office space but files your tax return using your home address, you must put your home address on form W-9. This will ensure that the Internal Revenue Service can match your 1099s with your Form 1040 without problems.

Step 6:

The requester's name and address might be provided in this optional stage. You may wish to fill out this box to preserve a record of to whom you handed your tax identification number.

Step 7:

The IRS names this part Part I, which has to make you question what all those steps you just completed were. In this section, you will need to provide the tax identification number for your company. This number will either be your personal Social Security Number (SSN) if your company is a sole proprietorship or your EIN if your company is a different kind of business. Although it is true that some proprietorships also have EINs, the Internal Revenue Service encourages sole proprietors to utilize their Social Security numbers on form. Doing it will make it much simpler to match any 1099s you get with your income tax return, which you will submit using your Social Security number (SSN).

Step 8:

Before you may sign form W-9, you must certify in Part II that all of the information you have provided is true. If you knowingly provide false information on a tax return, you might be subject to severe penalties, including incarceration.

Important Things to Keep in Mind While Filling Up Form W-9

If the Internal Revenue Service has advised that you must pay withholding backup because you failed to report all interest and dividends on your tax return, you must indicate this fact by marking box two above on Form W-9. In this case, please complete the form by its instructions.

For a real estate related W-9, you may cross out Item 2 on the list. Regardless of whether or not you are subject to backup withholding, the provisions of Item 2 do not apply here.