Understanding Tax Requirements

Form W-9 is a commonly used IRS form, but receiving it for the first time may be confusing. If you have your own business or are an independent contractor, clients may request that you fill out and send them a W-9 so they can accurately prepare your 1099-NEC form and report the payments they have made to you at the end of the year. Below, we’ve collected some of the common questions asked regarding this form and how to accurately fill it out.

What is Form W-9?

The purpose of Form W-9 is to provide correct information for 1099 reporting. For example, if a business pays you over $600 in nonemployee labor, then you should receive a 1099-NEC from that business at the end of the year. For that to happen, the business will likely request you fill out Form W-9 to collect accurate information.

What information is on Form W-9?

To complete Form W-9, you will need:

  • Your full name
  • Your business name (if you are operating under a different name)
  • Entity structure
  • Mailing Address
  • Your Social Security number or Employer Identification Number

There is also a Section 4 for exemptions. There is often not a need to fill out this section, but refer to the W-9 instructions for a list of exemptions that may apply.

What happens if I’m sent Form W-9 but don’t fill it out?

If a business sends you this form and you disregard it or don’t provide correct information, you could be subject to back withholding of 24% of your earnings.

Are there other penalties for not filling out Form W-9?

Yes! Not providing a social security or employee identification number could result in up a to $50 fine. There is a $500 fine for falsifying records regarding backup withholding. In other situations, civil and/or criminal penalties may apply. The best practice is to fill the form out correctly, sign it, and send it back to the person who you’ve conducted business with.

For more information about Form W-9, you can visit the IRS website or contact your Adams Brown advisor for further assistance.