W-9 Form
Published on September 26, 2024
by Jeff Patterson
Jeff Patterson is an American living in Scotland and joined the team at Expat Tax Online after experiencing the complexities of living abroad with a family.
Table of Contents
My bank is asking me to complete IRS Form W-9. Why?
If your bank asks you to complete a W-9, they believe you’re a US citizen or Green Card holder. They want your TIN (Social Security Number) so they can supply it with your bank account information to the US Treasury.
Most banks around the world have to report bank account information and balances to the US Treasury via their government for any account owned by a US citizen or Green Card holder.
What is W-9 form?
A W-9 is an official documentation of an individual’s or business’s personal information, such as your name, address, and Social Security Number (SSN) for individuals or Employer Identification Number (EIN) for businesses for tax purposes.
Submitting the W-9 form ensures your compliance with the Foreign Account Tax Compliance Act, or FATCA, to prevent tax evasion.
This act was passed to ensure that income held abroad is reported and appropriately taxed. It requires financial institutions like your bank to report your foreign assets as a US citizen.
You can find more information about FATCA on our website.
Who can submit a W-9 Form?
For individuals receiving income as a non-employee:
- Self-employed individuals
- Freelance workers
- Independent contractors
- Gig employees under non-employment structures
- Individuals receiving interest or dividends from investments
For businesses that provide services to another company or engage in financial transactions with financial institutions.
It’s important to note that a W-9 Form caters to individuals who are US citizens or residents.
Can I submit a W-9 if I’m not a US citizen?
No, a W-9 form is made for US citizens, but you can submit a W-8 form instead. A W-8 form is created for non-US individuals receiving income from the US.
How do I accomplish a W-9 Form?
Here’s a step-by-step guide on filling out the form:
- Line 1. Name: State your full name; it should match your tax return’s name.
- Line 2. Business Name: If you classify as a business or use a different name, you can enter the name here. If not, leave it blank.
- Line 3a. Tax Classification: Enter your current classification, such as an individual, sole proprietor, or corporation.
- Line 5 and 6. Address: State your mailing address so you can receive tax-related documents. The requester of Form W-9 will also mail your information returns here.
- Line 7. Social Security Number (SSN) or Employer Identification Number (EIN): Enter your SSN for individuals and EIN for businesses.
- Signature: Put your signature with a date to complete the form.
What common mistakes can I avoid when filling out a W-9 form?
- Make sure that your stated name matches your name on your income tax return.
- Ensure correct Social Security Number (SSN) or Employer Identification Number (EIN).
- Ensure your tax classification is correct. The IRS created a summary table for guidance in the instructions on Form W-9; it is on Page 3, Line 3a.
- Always include your signature and date it.
The IRS provides TIN matching e-services, which include validating your name and SSN combinations to ensure accurate filing. For more information, visit the IRS website.
If you incorrectly submitted a W-9 form, immediately notify your requestor and complete a new form for correction.
Where should I submit my completed W-9 form?
You must submit the form to the individual or business that requested it, not to the IRS. The requestor will need your personal information as they will report payments made to you to the IRS.
Since the details required for this form are sensitive information, it’s better to fax or mail the form instead of sending it through email.
You won’t need to worry. A requester who discloses your information in an unauthorized way will be subject to civil and criminal prosecution.
What penalties will arise if I don’t submit a W-9 form?
The requestor will automatically withhold 24% of any payments provided to you under IRS instructions if a W-9 form is not submitted.
Backup withholding
The IRS uses backup withholding to deduct a portion of your reportable income in order to make sure you pay your taxes.
The rate for the backup withholding is currently 24%.
This is the protocol for failure to submit W-9 form or an incorrectly filed form that has occurred. It will also subject you to tax penalties.
Who is eligible to be exempted from backup withholding?
If you do not have any errors in filing and the information provided to the IRS matches their records, you are generally exempted from the backup withholding.
Additionally, there are types of income that are not subject to backup withholding, such as:
- Retirement account distributions
- Real estate transactions
- Interest and dividend payments
- Wages or salary
- Unemployment compensation
How long is the validity of my submitted W-9 form?
Typically, the information will remain valid as long as it is free from error and consistently updated if there are changes.
What is the difference between Forms W-9 and W-4?
W-9 Form: For independent contractors, freelancers, or anyone who receives compensation but isn’t an employee, a W-9 form is required. It gives accurate taxpayer information to the individual or the business paying the individual.
W-4 Form: For employed individuals that have employer-employee relationship. This form requires the employees to provide the details then submit to their employers.
What is the difference between Forms W-9 and 1099-MISC?
The W-9 Form is used by businesses to gather tax information for non-employees within their business, such as freelance workers and independent contractors, for tax reporting.
1099-MISC, on the other hand, is used by businesses in reporting payments given to non-employees to the IRS for the applicable taxable year.
In conclusion, the W-9 is used to gather information regarding non-employees, and the 1099-MISC is used to account for the payments given to non-employees, so the forms work hand in hand.
