W-9 forms and Your Business

The W-9 form is an IRS document where the main purpose is to verify tax information for outgoing payments on business transactions.  It is officially called by the IRS “the Request for Taxpayer Identification Number and Certification” and a free copy of it is available on the IRS website.  In some ways, it is similar to a W-4 form for employees, but in this case it is for businesses and individuals that are specifically not on your payroll.

 

When should I ask for a W-9?

If possible, ask for a W-9 form from all vendors before payment.  That being said, you are not required by the IRS to have a W-9 on file for every vendor, as much as it is recommended.  Either way, always ask for one from individuals providing services, including (but not limited to) accountants, lawyers, and independent contractors.  You’ll more likely need a W-9 on file for them when it comes time to complete 1099 filing at the end of the year.

 

How often should I request an updated W-9?

W-9 forms don’t have an expiration date, so you can keep one on file indefinitely.  The vendor should send you an updated W-9 if their information changes.  However, it may be time to ask for a new one if you see evidence that their information (like remittance address or ownership) has changed.

 

What if I am doing business with a foreign entity?

The W-9 is only for US persons and businesses.  A foreign business or entity may need to complete a W-8 instead.

 

What if I am asked to complete a W-9?

If you are a business owner being asked to complete a W-9 for your business, then you should definitely complete one in a timely manner.  It is an easy form to complete and relatively self-explanatory.  I would encourage LLC owners to be careful to include their LLC designation, and if you are unsure about which Tax Identification Number (SSN vs EIN) to use, the IRS has a helpful chart in the instructions.

If you are an employee being asked to fill out a W-9, it is important to ask why.  Employees should be completing a W-4, not a W-9.  Being asked to fill out a W-9 may possibly be a red flag indicating the employer is trying to change the employee classification, perhaps in response to cash flow issues.  Employee versus Independent Contractor is not an interchangeable designation, and the IRS is cracking down on employers trying to avoid paying their half of the payroll taxes.

 

Resources:

Instructions for Requestor            http://www.irs.gov/pub/irs-pdf/iw9.pdf

W-9 (Fillable) & Instructions          http://www.irs.gov/pub/irs-pdf/fw9.pdf

 

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This blog is intended to provide informal business and bookkeeping information to educate the general public.  It should not be interpreted as individualized tax, accounting, legal or other business and professional advice.  Always seek the assistance of a professional that is aware of your specific situation prior to taking any action for yourself or your business.