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For those who are independent contractors, as well as for people that work for themselves, a W9 Form is needed to report their Social Security Number or Business Tax Identification Number to their clientele. This is a pretty cut and dry scrap of paper when it comes to government forms. You may simply need to provide your name, your address, as well as your Social Security Number (or your Employer Identification Number, for those who are contractors and are thus considered a separate business entity all their own).
Besides the above info, an IRS W9 Form will also ask whether or not you are subject to backup withholding. What is “backup withholding,” you could ask. Well, that’s withholding at a flat rate of 28 % on payments made to you or your business under certain circumstances. There are a couple of commonplace reasons for using backup withholding. One explanation is if your name and Social Security Number does not match the name and Social Security Number the IRS has on file for you. One more reason would be if you have outstanding tax debt. In this case the IRS would have notified you that you are subject to compulsory backup withholding until the outstanding tax debt is totally paid for.
During the tax season of the year, contractors will be getting W9 forms to complete. Since in that time of the year, clients are preparing to send out their 1099 forms. The 1099 Form is used to report self-employment revenue.
Other places you may be getting a W9 from are brokers and monetary institutions. They might ask for a W9 if you may earn interest income, dividends, or trading stocks and other stocks. As well as the usual places a few people may receive requests for the W9 form from more peculiar places such as landlords and people or businesses. This is exploited to ask, officially, from an individual or business their name, address, and taxpayer identification number for the requesting party to correctly issue tax documents to the IRS.
As a general rule, any kind of business that requests a W9 Form is one that pays you interest, generally, the sorts of firms that request Form W-9 is any business that pays you reportable income. However if you should happen to feel that you have received this form from a weird source you need to ask them why they are asking for the form and what they are going to be using it for.
What about foreign subcontractors? With foreign contractors A W9 isn’t required, it’s just needed to gather info from US folks and companies. However if you’ve got a foreign contractor that’s working for you, they will most probably be required to fill out one of the assorted W8 Forms.