Are you an independent contractor, working in the US, wondering why you have received a Form W 9?
Before reaching out to the entity who has requested it, go through this article, and we are sure it will answer, if not 100%, then at least 99% of your queries.
W 9 is a form requested from independent contractors from the entities or individuals who have rendered their services. It is a must as per the US Tax regulations set by the IRS. It requires the name, company name (wherever applicable), tax identification number, and address of the individual.
Hoping that you have understood the meaning, let’s move to the more important part.
Common Questions related to Form W 9
Form W 9 is considered one of the simplest forms to fill related to the tax compliances in the US. However, there can still be a few questions that need to be answered to understand its significance and use. Below are some of the most commonly asked questions about the form.
Do employees also need to fill Form W 9?
Well, it’s true that the employees also need to provide the information to their employers per the US Tax Compliance. However, they are required to fill Form W 4. An employer issues this form in order to ask the amount of payroll taxes that can be withheld.
Form W 9 is useful for non-employees such as consultants, freelancers, professional experts, and so on who render their services. They are also requested to fill the form. So, one must be aware of the form they are filling in order to make the distinction clear.
Is it required to send a W 9 every year?
This form includes specific information about the independent contractor who renders services to an entity. One must fill new W 9 form or update it only if there are any changes in the given information. If the information and the entity requesting the form are the same, then it is not required to fill the Form W 9 every year.
What is backup withholding?
Backup withholding is a portion of payment made to an individual that an entity can withhold in case they refuse to fill W 9. As per the tax regulations in the US, the payer can withhold 24% of the pay made to the independent contractors and is sent to the IRS.
It is considered as the tax on the income which otherwise would not be withheld as the independent contractor will have to pay the taxes on their own. So, the backup withholding can be seen as a backup option of getting taxes paid by the individuals in the US.
What to do in case an unknown entity requests me to fill Form W 9?
If you have received the form from an unknown entity or someone who should not have sent you Form W 9, you can ask them the reason behind it. Remember that you should not receive a W 9 in case you are an employee. Also, if your income from that source is less than the minimum threshold amount mentioned for Form 1099-NEC or 1099-MISC, you are not liable to fill in the details in Form W 9. Consult from a tax expert to guide you through in such a situation.
Is it possible to refuse filling the Form W 9?
If you have received the wrong or incorrect request for W 9, then yes, you can refuse to fill it. But ensure that the reason is genuine.
If per the law, you must fill a Form W 9, refusing to do so can lead the entity who rendered your services to withhold 24% of your pay as backup withholding.
In which case do I need to mention the EIN?
In some cases, LLCs can also operate as independent contractors. If the LLCs are single member LLCs, then they are required to mention the name of the company as well as fill the business type along with the individual taxpayer identification number.
However, if it is a multi member LLC, then you must mention the Federal Employer Identification Number instead of ITIN.
W 9 is a commonly and widely used tax form across the US. However, there could be many frauds that can happen around it. Therefore, to make sure that you are not getting into a scam, keep the following things in mind:
- Be careful about the individual/entity requesting the Form W 9: In case you don’t know the entity or doubt it by sharing your crucial information, get it checked and confirmed first. It is better to be smart than sorry.
- Beware of the channels: Make sure that the channel you are using to share the form or information is secured. If you are using online mode to send the form, keep it encrypted to keep it safe.
- Be sure of the Form request: In case you are an employee, then remember that you must receive a Form W 4. Make sure your employer is not scamming you by keeping you as a freelancer as it reduces many benefits.
- Be sure of the purpose: In case you have requested an unexpected request of W 9, then ask the requesting entity for the purpose. Only after confirming the need of W 9, fill the form.
If all this information has made you realize that you are one of the independent contractors who must fill this form and are unaware of it, we have got you. Go through our write-up on How and When to fill Form W-9 to keep up with the US Tax Compliances.
Written by – Priyanka Rampal
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