Be sure to check everything carefully, especially your TIN. This will help prevent delays in processing and avoid possible penalties. One common mistake about Form W-9 is thinking everyone who wants it is trustworthy. Be careful to check who is asking for it before sharing your important tax information. Filling out a W-9 is easy, but being correct is very important.
Key Takeaways for Businesses
If you are subject to backup withholding, cross out item two in Part II of Form W-9 before submitting it. Businesses use the information that you provide on a W-9 form for preparing 1099 forms that get sent to you and the IRS. However, the requester has no obligation to file the W-9 with the IRS. Any payee who will receive $600 or more in compensation from your business during the tax year should fill out a W-9 form.
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Penalties for Non-Compliant Form W-9
If you provided services for a client and made over $600 a year, you will likely receive a 1099-NEC. You could get in trouble if you do not provide a W-9 when asked or if the info is incorrect. Giving false information on purpose can also lead to penalties. These penalties might include a backup withholding of 24% on the payments made to you. Enter the exemption code here if you’re exempt from backup withholding or FATCA reporting. Accurate information on your Form W-9 ensures that payments you receive – or other transactions that require this form – are properly reported to the IRS.
At the end of the tax year, the information contained on the completed Form W-9 gets used to prepare 1099 forms like 1099-NEC, 1099-MISC, 1099-INT, and 1099-DIV. Making sure that Form W-9 is completed accurately can save a lot of trouble come tax time. Use Line 7 if you need to supply the person or business paying you with account information such as a bank or brokerage account that pertains to the request for the W-9.
Report all federal income tax withholding from nonpayroll payments or distributions annually on one Form 945. Form 945 is used to report income tax withholding on nonpayroll payments including backup withholding and withholding on pensions, annuities, IRAs, military retirement, and gambling winnings. A payor must remit to the IRS all monies withheld from reportable payments based on a certain deposit schedule.
- Entering false information constitutes an information return penalty, starting at $50 per erroneous information for the first 30 days.
- If you receive an email saying you won a prize for a contest you don’t recall entering, you may not want to give that person a W-9.
- Common mistakes include incorrect TINs, misspelled names, or wrong tax classifications.
- If you complete Form W-9 as an individual, you don’t need to worry about filling out this section.
- If an exempt payee code or an exemption from the FATCA reporting code applies, enter either in this section, or leave blank if none.
- Depending on the type of person or entity the form is for, the TIN may either be a Social Security Number (SSN) or a company’s Employer Identification Number (EIN).
Request for Taxpayer Identification Number and Certification
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- W-2 is known as the “Wage and Tax Statement.” This form is important for your taxes.
- Form 1099 reports earnings to an independent contractor or other individual who receives payments for various reasons.
- For information on IGAs, see the IRS website FATCA page, available at IRS.gov/FATCA.
- Amanda Bellucco-Chatham is an editor, writer, and fact-checker with years of experience researching personal finance topics.
- Section 664 or section 4947 trusts are exempt from W-9 taxes because they are charitable trusts.
- Enter your address where you want any tax forms sent (like your 1099).
- Stock options and restricted stock units (RSUs) are popular forms of employee compensation that can…
- IRS Form W-9, officially titled “Request for Taxpayer Identification Number and Certification,” is a document used by businesses to obtain the correct TIN from individuals or entities they pay.
- The most common situation occurs when an independent contractor completes work for a company and receives payment.
Another common mistake is choosing the wrong type of business structure. For example, if you select “sole proprietor” but you are actually a partnership, it can create issues with how you report your income. If you feel unsure about your status or have questions about your taxes as an independent contractor, it’s best to speak with a tax professional. Comprehensive Guide to Federal Tax Forms Federal tax forms are official documents provided by the…