Just what is a W-9?

It is that time of year when tax forms start gathering around you, but we wanted to highlight one that is sometimes misunderstood and at other times not even realized it is needed – the W-9.

Form W-9 is rather simple with only one purpose. It allows for the exchange of a Tax Identification Number (TIN) — which will either be an Employer Identification Number (EIN) or Social Security Number (SSN). This is different than many forms because it is an “information return” that gives information to someone else and not directly to the IRS.

So let’s start at exactly what the form is - IRS Form W-9, Request for Taxpayer Identification Number and Certification. As you can see via that link, it is only a one-page form and really goes no further than determining what type of entity someone is and obtains their TIN.

It does come up a lot this time of year because although it can be filled out and acquired at any time – and ideally it is a good practice to get it before making a first payment - that number is needed for some tax forms.

There are four common situations in which you might be required to fill out or send someone a W-9 form:

1. A contractor, freelancer, or consultant plans on being paid (or has been paid) more than $600 by a particular client in a tax year. A completed W-9 is needed before sending a 1099 form, which then also reports that income to the IRS.
2. Banks sometimes require a W-9 when you open a new account.
3. A bank or other financial institution might also need a W-9 from you in order to submit a 1099 form to report things like interest income, distributions, and proceeds from real estate transactions.
4. If someone forgives or cancels a debt, they’ll need to file a 1099 form with the IRS and need the completed W-9 to finish the process.

We also want to give a little warning here about sharing personal information. The W-9 is a real form and can be used for these multiple legitimate reasons, but it specifically requests sensitive information, so only fill one out if you are confident that the situation is legitimate. If you do not have that confidence, do not fill it out.

But overall, this is a simple form with straightforward uses. It essentially gathers a little bit of information so that other information can be properly reported to the IRS. 

Warmly,

Josh Bousquet
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