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What is a W-9 IRS Tax Form and What is Its Purpose?

What is a W-9 IRS Tax Form and What is Its Purpose?

The W-9 form is used to provide your correct Taxpayer Identification Number (TIN) to the concerned authorities. The following WealthHow article will tell you all about the W-9 IRS tax form and its purpose.
WealthHow Staff
"By offering clients the ability to request and manage their vendor W-9s completely on the web, TrackW9 takes the hassle out of tracking and confirming vendor information."
Sharon Lindsey West, CEO, Track1099

Filing for tax is an important and mandatory procedure. Employees do so in order to provide their employer with their personal information. For this purpose, the employer uses the W-9 IRS form. As mentioned above, this form helps employers to collect information about independent contractors whom they might have hired. The employer keeps this private information with himself, it is not necessarily sent to the IRS. So, what is a W-9 form and what is it used for? You will find the answers to all your questions in the paragraphs below.
Overview and Purpose of the Form
  • The purpose of the W-9 form can be summarized in two words - 'tax filing'.
  • However, that is not the sole intent; the main purpose is a request for certification and the Taxpayer Identification Number (TIN). It is a commonly-used IRS form.
  • It is filled and submitted by employees to their employers (or for that matter, whichever organization is their source of income).
  • This information is retained with the employer, and is not sent to the IRS.
  • It is used to prepare the paychecks of the employees for that year.
  • If you are into business yourself, your client may request that he be allowed to fill and submit the form so that the payments they make are reported promptly.

Vital Terms

Taxpayer Identification Number (TIN)
  • This is either your Social Security Number or the employer identification number.
  • If you are a non-resident citizen and do not have a Social Security number, you will be assigned a TIN, which you will have to fill in the form.

Backup Withholding
  • Sometimes, the IRS requires that the employer withhold a percentage of the employee's earnings to pay income tax. This is called backup withholding.
  • If you are subject to this, the IRS will send you a formal notice.
  • When you receive this, you should promptly notify your company about the same.

Certification
  • It is just like any formal certification that is provided in most of the IRS forms.
  • All you need to do is to read it once (carefully, of course), and sign at the bottom.

Procedure Explained
  • You will be asked to fill your full name on the first line. This name should match the one you have given in your income tax returns.
  • On the second line, you have to fill your business name, i.e., if you are running a business under a separate name.
  • The next section requires that you select your tax classification.
  • Select 'Individual/Sole Proprietor', if you are employed under someone (or even self-employed).
  • There are other options for people who run huge estates and corporations.
  • Sign at all the places in the form. Your signature is a proof that you are either a U.S. Citizen, non-resident, or a corporation representative.
  • After filling in all the details, submit the form to your employer. This information will be of use during the payroll process.

List of Applications

For Insurance
  • The form is used by insurance companies to process information.
  • All the confidential information, like name, address, policy number, classification, etc., are encompassed in this single document that makes it simpler for the insurers.
  • Not all of them demand this form, certainly, it is asked for only if there is a conflict with the records.

For Companies
  • The form is mostly used by companies.
  • Employers request this document from their employees so that they can get easy access to your private information, which is needed during the payroll process.
  • Primarily, they need access to your TIN.
  • By submitting this document, employees will be certifying their position, i.e., whether they are U.S. citizens, or non-residents, etc.
  • This data is not sent to the IRS, it is maintained with the employer himself.

For Business
  • Businesses commonly use this form to get information about the freelancers (independent contractors) whom they hire.
  • If they pay these freelancers more than a stipulated amount, they will need to notify the IRS.
  • Remember an important point though, businesses do not send the W-9 form to the IRS.
  • The fields to be filled are the same, you have to fill out your business name and tax classification fields carefully.

For Real Estate
  • In case of real estate, this form plays an unusual role.
  • It is a part of the documents needed for closing the real estate deal.
  • In this scenario, this form captures all the information related to the transactions that have occurred during that year.
  • Your TIN, address, company name, etc., everything is filled in and recorded, so that there are no complications later, after the deal is closed.
  • This information is also used in other forms, depending on whatever the situation demands.


Unpleasant Consequences
  • If your employer requests that this form be duly filled and submitted, and you fail to do so, you will have to pay a penalty of USD 50.
  • You may also be enforced with backup withholding. This means that 28% of your check amount is withheld and the amount is forwarded to the IRS.
  • In case you file an incorrect statement in order to save yourself from backup withholding (assuming you are actually supposed to be subjected to the same), you will have to pay a penalty of USD 500 (per instance).
  • If you provide wrong information, you may have to face criminal charges and may be, even imprisonment (rather humiliating, isn't it?).
  • Suppose you are the employer and you disclose or misuse the private information about your employee, you may have to face criminal penalties too.

The W-9 form is not a very complex one and the procedure for filling it up and submitting is simple and convenient. Therefore, do not delay the process. As mentioned above, failing to do so can lead to severe consequences. As a diligent employee as well as citizen, it would be expected of you to follow the rules effectively. Also, remember that it is something that the employers and the IRS need not worry about (in government procedures), since it is to be filled and submitted to the 'Requester', and not to the IRS.