A W-9 form is a tax information form used by companies and people who make payments other than wages or salaries for services. The person or company sends the completed W-9 form to the Internal Revenue Service when it makes non-wage payments during a tax year. In certain circumstances, you may be required to complete a W-9 form provided by a person or business.
Independent Contract Work
If you perform services for a person or business as an independent contractor, and you reside in the United States, you will have to complete a W-9 form provided by the person or business. Some service recipients require a completed W-9 before paying you more than $600 in a calendar year; others may require the form before paying you at all. Examples of independent contractors include commercial lawn care, freelance programming and design, business building maintenance and consulting.
Other Non-Wage Payments
If you receive dividends or proceeds from stock sales, you will likely have to complete a W-9 form for the broker making the payment. You may also have to complete this form before receiving interest income from investments. The broker or entity will need to provide this form to the IRS for any person or business to which it pays $600 or more during a calendar year.
The purpose of the W-9 form is to provide identification information to the IRS for companies or people to whom it makes non-wage payments. This is necessary for the person or company making the payment to claim amounts paid as business tax deductions. The form also helps the payor prevent having to reserve backup witholding taxes -- by certifying that you are not subject to backup witholding, you allow the payor to demonstrate to the IRS that it does not owe payroll taxes on amounts paid to you.
When you complete a W-9 form for a payor, you must disclose your taxpayer identification number, which is typically either your Social Security number or your federal employer identification number. Failing to provide your taxpayer identification number can result in a $50 penalty for each W-9 form you complete. You may be subject to a $500 fine for making a false statement with regard to backup withholding. Also, providing false information on a W-9 form can result in criminal prosecution, additional fines and imprisonment.