Form W-9 provides your US tax ID, known as TIN: Taxpayer. Identification Number, to the person, who may include a financial institution. Who needs to report certain information concerning you, like income which is paid to you, contributions to IRAs made by you, interests, dividends as well as capital. Gains earned by you. It also reports certain real estate transactions. Entered into by you, the balance of certain foreign accounts, and others to the IRS.
Who Must Complete Form W-9?
Form W9 is to be completed by US persons: citizen or green. Card holder individuals, individuals who are treated as residents for. US tax purposes either because they live in the US, work there or are married to a. US individual as well as elected to be one: also entities like. Corporations, LLCs, estates, and trusts created or organized under US law.
Why is Your Financial Institution Asking You to Complete a W9?
US financial institutions will ask you to complete. Form W9 in order to obtain your personal identifying information (name, address, tax ID), in order to report income paid to you, to the. IRS, like interest, dividends, capital gains, cancellation of debt, royalties, rents, etc. or income. Paid by you to the institution, like mortgage interest.
Foreign financial institutions will also ask you to complete. Form W9 in order to comply with FATCA reporting requirements. Imposed on them. Now, under FATCA, foreign institutions are required to report. Certain information to the IRS related to the accounts and income of their US clients.
Who Else May Request a W9?
If you are in doubt of who else may request a W9. This is your answer. Any US business that makes payments to you may require. That you complete the W9 form. Now, these payments could be for services offered by you to the business as a usual employee or independent contractor, for rents paid to you as a landlord, royalties paid to you as a copyright owner, and many others. Now the same goes for Real Estate Brokers who assist you with the sale or purchase of US real property.
What Happens if You Fail to Complete a Form W-9?
If you fail to complete a Form W-9, the US financial institutions and other businesses are withholding agents for income paid to the US persons in the conduct of their trade or business. If you do not complete and provide a completed and duly signed Form W9 in a timely manner to the requester, you may be subject to backup withholding. Now backup withholding is generally 28% of the payments made to a US person.
On the other hand, foreign financial institutions have reporting requirements under FATCA and if you are a US person who fails to provide a timely W9, the institution will not be able to comply with FATCA and may close your accounts and refuse to continue to do business with you as regards that.
How to Fill Out Form W-9
Firstly, i will be representing a straightforward pattern of filling out a W-9 form. The form is not an entire page long, and excluding the instructions, the business that hires you should fill in its name and employer identification number, while you fill out the form line by line.
Line 1 – Name
Firstly, you should enter your name in full, and it should match the name on your individual tax return.
Line 2 – Business Name
Secondly, if you have a business name, trade name, DBA name, or disregarded entity name, this where you will have to fill it in. If you do not have a business name, leave this space blank.
Line 3 – Federal Tax Classification
Thirdly, this is the section that defines how you, the independent contractor is classified when it has to do with federal taxes. Here, you will check the first box if you are filing as an individual, sole proprietor, or single-member limited liability company (LLC) owned by an individual and disregarded for U.S. federal tax purposes.
Line 4 – Exemptions
Fourthly, for this section, you do not need to fill it as an individual. Only certain businesses or entities with any reason for exemption are required to fill these spaces. If this applies to you, you will have to provide a number or letter code that states that reason.
If your entity happens to be exempt from backup withholding, you will fill in the first line with your code. This should apply to most entities. Howbeit, if your business is not, the company who hired you for your services will have to withhold income tax from your pay at a flat rate of 24% and send the same to the IRS, which is known as backup withholding.
Alao, if you are exempt from reporting needed by the Foreign Account Tax Compliance Act (FATCA), you will have to fill in the second line. Understand that the latter only applies if you hold your accounts outside the United States. If your account is maintained in the U.S., you can skip the second line or write ‘N/A’. If you are not sure about exemptions, you can consult Page 3 of the form to learn about situations that would make you exempt.
Line 5 & 6 – Address, City, State, and Zip Code
Furthermore, for line 5, you will enter the address (number, street, and apartment or suite number) where your employer will mail your information returns. For line 6, you have a field to enter the city, state, and ZIP code of this address.
Line 7 – Account Number(s)
Interestingly, this line is optional, and it is where you can fill in any account numbers your employer may need. Most people may leave this blank.
Part 1 – Taxpayer Identification Number (TIN)
Also, in this section, you have two options. You can either key in your Social Security number (SSN) or your employer identification number (EIN). Use your SSN if you file as an individual or Single-member LLC. Then use your EIN if you file as a multi-member LLC classified as a corporation or partnership. For a sole proprietor, you can use either number, but your SSN will be much preferred.
Finally, if you are a resident alien, and you are not eligible for an SSN, you should use your IRS individual taxpayer identification number (ITIN).
Part 11 – Certification
Lastly, here, you are required to sign and date the form, to indicate that you provided your correct information.