If you are asked to fill out a W-9 instead of a W-4 when you first start a job, what does that mean?

I'one thousand a freelance writer—a career independent contractor—then I've come to know Form W-9 very well. And every bit far as tax paperwork goes, it's by far my favourite!

When I'yard filling out Form W-9, it'due south considering I've won a new customer. The form gives me an like shooting fish in a barrel fashion to submit all my vital data to the customer and then I can get-go working, and they tin start paying me. What'southward not to like about that?

What is a West- ix tax form? What is the purpose and use of the W-9 Form?

Class Due west-9, Taxpayer Identification Number and Certification, is primarily used to provide the data your client needs to issue you a Form 1099-MISC at the cease of the year. Grade 1099-MISC documents not-employee compensation and other types of income. It includes information similar to that found on a Form West-2, Wage and Tax Argument.

A visitor or private may also asking a Westward-nine from yous for real manor transactions, mortgage involvement payments, acquisition or abandonment of secured property, cancellation of debt, or your IRA contributions. Those are less common, withal.

Usually, the political party requesting a W-9 Revenue enhancement Class volition provide a blank one for you to fill out. You can also hands download the grade from the IRS website. Only the party that requested it needs a copy. The IRS does not.

The W-9 asks for five pieces of information: your name, business name (if applicable), accost, taxpayer identification number, and the type of business concern entity you operate. It's pretty painless as far as revenue enhancement paperwork goes.

Course W-9 vs Form West-4

The business you lot work for must classify you lot equally an independent contractor or an employee. If you lot're an independent contractor, the visitor should request a Form West-ix from you. If you are an employee, they should ask you to consummate Class Due west-4 so they can withhold payroll taxes.

Nether a West-9, the company volition not withhold any taxes for y'all. Yous are responsible for ensuring the right amount of taxes are paid to the IRS. And when information technology comes to Social Security and Medicare taxes, yous have to pay both the employer and employee'southward share.

Information technology can be a niggling confusing to differentiate whether you should fill out Form W-ix or Form Due west-4 based on the actual work performed. A meliorate gauge is the circumstances around the working relationship. Generally, the more control an employer exerts over what a worker does and how they practice information technology, the more probable that person is an employee and non an independent contractor.

Another quick way to tell is to make up one's mind whether the business aspects of the relationship are controlled past the payer. That includes how the worker is paid, whether expenses are reimbursed, which party provides tools, supplies, etc.

If the employer controls those details, the worker is more likely an employee. If employee benefits are offered, like pension plans, paid vacation, and matching 401(k) contributions, the worker is probably an employee.

Sometimes an employer might endeavour to salvage coin past classifying an employee as an contained contractor. By doing and then, they aren't on the hook for paying their share of Social Security and Medicare taxes on the employee's income. But, if that happens to yous, your employer'south "savings" volition come out of your pocket. That's why it'south of import to accost the state of affairs swiftly if it arises.

Common questions nigh Form W-9

• Yous must transport a new Westward-9 to active customers or clients whenever your data (name, business name, accost, or Social Security number) changes.
• By law, you are only obligated to provide a W-9 to parties that intend to pay you interest, dividends, not-employee compensation, or whatsoever other type of reportable income. If someone unexpected asks for a W-9, ask them why they need it. If their answer doesn't align with any valid reason, you legally don't have to provide one.
• If a business appropriately requests a Due west-9 and y'all do not submit one, y'all'll likely be subject area to backup withholding up to 28 pct on your payments.

Sentinel out for red flags

Although it'due south a basic and widely used tax document, that doesn't mean you lot should take whatever less care with handling Form W-9 than you would handle other tax and financial documents. Here are a few things to await out for:

• The person or business organisation request you for a Due west-9 seems shady. In general, you should be careful giving out sensitive information like your name, accost, and Social Security number. Make sure you're reasonably comfy with the person or organization request for a W-nine earlier you supply that data.
• Use only secure channels to send a W-9 tax form. If yous cull to email Form W-9, brand sure to transport it as an encrypted attachment. You can also use another secure delivery method, such equally hand delivery or regular mail.
• The purpose of a W-nine asking is unclear.If you lot're not sure why the requestor wants a Form W-9 from you, ask them what tax documents they'll utilise it to prepare for you.
• You thought you were getting a Grade Due west-four. If you're starting a new job and the employer wants a West-9 instead of a West-4, clarify whether you're an employee or contained contractor. It's against the law for them to require you to work similar an employee but pay you lot like a contractor.

Special Form Westward-9 information for Limited Liability Companies

• If the tax status of your Limited Liability Company (LLC) is separate from you,

  such equally a partnership, C-corporation, or Southward-corporation, list the LLC name, its federal employer identification number, and cheque the advisable tax classification box on the Due west-nine tax class. Do not check the "limited liability company" box.

• If the LLC is endemic by another LLC, check the "limited liability visitor" box. Also, indicate the taxation nomenclature of the parent LLC.
• If the LLC is owned by a single person, listing the name of the owner on the "name" line and the name of the LLC on the "business organization name" line. The Internal Revenue Service (IRS) would rather take the owner's Social Security number instead of the LLC's federal employer identification number.

• Are You a Freelancer? Get a Handle on Your Taxes
• Small Business Calendar week — 7 Strategies for Saving and Tax Planning
• 7 Tax Tips for the Freelance Economic system
• Means to Save for Retirement on Minimal Income

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Source: https://blog.taxact.com/everything-you-need-to-know-about-form-w-9/#:~:text=Form%20W%2D9%20vs%20Form%20W%2D4&text=If%20you%20are%20an%20employee,are%20paid%20to%20the%20IRS.

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