What is a W9 Form? Everything You Need to Know

Every small business has its own unique challenges, but every business owner has to face tax season—and with it, questions like: what is a W-9 form? And is a W9 the same as a 1099? How are they related?

If your small business works with freelancers and independent contractors, you’ll find yourself needing these answers in a hurry when it’s time to prep taxes. Here’s a guide to help you with understanding how to fill out W9 forms come tax season.

What is a W9 Form?

A W9 form is an Internal Revenue Service (IRS) tax form that a non-employee uses to provide information to the person who paid them. It is requested by the payer from the payee to collect tax information and is not submitted to the IRS. 

Small business owners need to work with a number of payroll tax forms. So what is a W9 for? Usually, you’ll require non-employees to provide a completed W9 form before work begins so that your business has all the information needed for tax reasons. That way, independent contractors filing their taxes can have the appropriate record of income earned once you send them Form 1099, which is dependent on information provided in the W9.

Who fills out a W9 form?

So who needs a W9? The most common case is for independent contractors, freelancers, and vendors, who fill out W9 forms as long as they perform services that total more than $600 in a calendar year. This is in contrast to employees, who receive W-2 forms.

However, there are a few other situations that a W9 form is used for, involving miscellaneous income such as investment holdings, real estate transactions, forgiven debt like credit card or mortgage interest debt, royalties, and other special situations.

How to fill out W9 forms.

You may be wondering: where do I get a W9 form, and what information does it provide? You can find the 2024 W9 form on the IRS site. If your contractor asks how to fill out W9 forms, here’s what they need to include:

• Name: Providing a full legal name is necessary for tax purposes. 
• Business name (if different): Some freelancers and contractors may do business under a different name. This field is where they should provide that information. It can be left blank if that information isn’t applicable. 
• Federal tax classification: This section has several sections: individual/sole proprietor, C corporation or S corporation, Partnership, Trust/estate, or LLC.  
• Exemptions: Businesses that are exempt from withholding should provide the tax code that indicates the reason for withholding here; otherwise, this section can be skipped.
• Address: The full home or business address of all taxpayers is necessary so that requesting businesses can send 1099s and other correspondence to the correct place. 
• Taxpayer Identification Number: The Taxpayer Identification Number (TIN) is crucial for the IRS to track income and tax payments accurately. This could be a Social Security Number (SSN) or Employer Identification Number (EIN), depending on the tax classification. 

When requesting a W9 form, make sure to emphasize that providing accurate information is important for proper tax reporting and avoiding potential issues with the IRS. 

What happens if you don't fill out a W9 form?

Small business owners need W9 forms from non-employees to fulfill tax reporting obligations. Independent contractors are motivated to fill these out, since several consequences could arise if they don’t: 

• Backup withholding: Without a valid W9 form, the payer—in this case, a small business owner—has to withhold 24% of the pay in order to provide the IRS with its share of taxes, even if taxpayer information wasn’t provided. 
• Penalties: Not filling out a W9 form can also result in penalties. The IRS imposes a $50 penalty for each failure to provide a correct taxpayer identification number (TIN). If a taxpayer makes a false statement with no reasonable basis that results in no backup withholding, they could face a $500 penalty. 
• Missed income reporting: Without a W9 form, the payer can't accurately report your income to the IRS. This can lead to discrepancies in the contractor’s tax records. When the IRS notices these discrepancies, it may trigger an audit or other tax-related issues. 

Handle payroll tax forms with ease. 

While the W-9 form is filled out by the independent contractors you work with, if you’re a small business owner you’re no stranger to payroll tax forms. When you’re juggling them all at once during tax season, it’s easy to feel overwhelmed. 

Thankfully, you don’t need to tackle payroll forms on your own. Using Homebase payroll, taxes and paychecks will be automatically calculated, and we can pay and file your payroll taxes for you. We can even give your employees and contractors on-demand access to their pay stubs, W-2s, and 1099s in the Homebase app. 

Since we’re designed specifically for small businesses with hourly teams, you can use our time tracking and scheduling tools to automatically update your records as employees clock in and out, making payroll a breeze come tax time. 

Let's make work easier for you. Get started for free with Homebase today and streamline your team management effortlessly..