When a company purchases services from you, as an independent contractor or seller, it often sends you IRS Form W-9 and requests certain information, such as your taxpayer identification number. The company needs the information in order to send you an information return, such as the 1099-MISC, at at end of the tax year.
The information requested on Form W-9 is relatively straightforward and minimal. Form W-9 asks for your name, your business name, your business address, and the type of business entity you run -- for example, you check "sole proprietor" if you are a sole proprietor. You must also provide the tax identification number used by your business, which is either your Social Security number or, if you have one, your EIN, or employer identification number.
Senders and Recipients
You may be asked to complete a W-9 in a few different situations. Businesses that hire independent contractors typically require workers to submit a Form W-9 before you begin work, so that tax information will be on file if you earn more than $600 during the tax year. A bank or other financial institution may also send out a W-9 when you receive certain interest payments or dividends.
W-9 and Income Taxes
If you are an independent contractor who filled out W-9 information and who earned more than $600 in the tax year, the business who paid you sends both you and the IRS a 1099-MISC, which lists the total earnings subject to taxation. W-9 recipients who receive money from interest, prize winnings, dividends or royalties receive other types of 1099 forms when various earnings thresholds are crossed. The taxpayer reports information provided on the 1099 forms to the IRS on tax forms Schedule C, Profit or Loss from Business or Form 1040, U.S. Individual Income Tax Return.
Non-Citizens and the W-9
The use of tax form W-9 is limited to citizens of the United States. Non-citizens engaged in independent contracting or earning money with various financial citizens must be sent a form from the W-8 series by businesses or individuals contracting for services.