Q: I’m wondering if you can provide guidance on how people with single-member LLCs typically fill out W-9s: do they use their SSN, or do they provide their EIN?
Thank you to Rachel Rey, owner of RaRey Agency, LLC, for that great question! IRS Form W-9 is a tax form that businesses will commonly send to independent contractors, freelancers, and gig workers after they hire them to gather the tax information the business needs to file the 1099 form. Since this is a form that many business owners—as well as independent contractors, investors, and home owners—need to be familiar with, we wanted to explain the W-9 form on our blog. What is the W-9 form, who fills it out, and how is it used?
Who Needs to Fill Out IRS Form W-9?
IRS Form W-9, Request for Taxpayer Identification and Certification is most commonly used by businesses that hire independent contractors, in order to collect the contractors’ tax information. The business sends the W-9 form to the independent contractor, who completes it and sends it back. However, banks and brokerage firms also send out W-9s to their clients to gather information in order to report other kinds of income, including:
- Real estate transactions
- Mortgage interest paid by the home owner
- Acquisition or abandonment of secured property
- Cancellation of debt
- IRA contributions
How do I fill out the W-9 form?
As tax forms go, the W-9 is fairly short and simple. Here’s what you need to include on the W-9:
- Your name
- Business name (if different)
- Your tax classification (for example, sole proprietor, S-corp, etc.)
- Exemptions, if any (doesn’t apply to individuals)
- Your address
- Requester’s name and address (optional)
- Account number(s) (optional)
- Taxpayer ID number (SSN, EIN, or ITIN)
- Signature and date
Check out our complete guide to filing taxes as an independent contractor.
Should I use my SSN or EIN on the W-9 Form?
That depends. Obviously if you don’t have an EIN, you will need to use your SSN on this form. If you are a single-member LLC or a sole proprietor who has an Employer Identification Number (EIN), you can choose whether to include your social security number (SSN) or EIN on the W-9 Form. Typically, it’s a good idea to use your EIN, since sharing your SSN leaves you more vulnerable to identity theft. The only reason to use your SSN instead is if you are doing work that is unrelated to your business.
Find out how to get an EIN.
What is backup withholding?
If the IRS notifies you that you’re subject to backup withholding, this is probably because you didn’t give them the correct tax ID number or repeatedly under-reported your income on past tax returns. If you’re subject to backup withholding, the person paying you must withhold 24% of your income and pay it to the IRS.
Using a W-9 Form as a Business Owner
If you’re a business owner who hires independent contractors, it’s your responsibility to send the contractor a W-9 form before he or she starts work. If you don’t send out a W-9 form, you could have trouble completing your 1099 Form when tax season comes around.
Here’s what to do if you forgot to send your contractors a 1099-MISC.