what is a w9 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 Buzzle article will tell you all about the W-9 IRS tax form and its purpose.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.