What is the Purpose of Form W-9
When your business uses the services of a vendor hired as an independent contractor or freelancer and the individual is paid more than $600 in labor and services or $5,000 in direct sales in a year, the Internal Revenue Service (IRS) requires you to report these payments. The purpose of Form W-9, Request for Taxpayer Identification Number (TIN) and Certification, is for you to collect the proper information needed to complete the 1099 Form for taxes.
When your business hires an independent contractor for work, you do not withhold income tax or pay the FICA (Federal Insurance Contributions Act) tax. The paying of these taxes are the responsibility of the independent contractor. Your responsibility is to report to the IRS and the vendor the full amount paid for services.
What Form W-9 Collects:
- Business Name
- Business Classification or type of business
- City, State, Zip Code
- Social Security Number or Employer Identification Number
No W-9 equals No Pay.
Proper record keeping is critical to ensure you have peace of mind during tax season. Put the same process in place with independent contractors as you do with your W-2 employees. The pain of tracking down proper documentation at the end of the year can be avoided by requiring your vendors to complete this form prior to payment for work completed.
Protect Your Business
Issuing Form W-9 to the vendor is your responsibility as the employer. Even if the vendor is performing a one-time job, protect your business by obtaining the completed W-9 from the vendor.