What Is the W-9 Form? Learn Its Purpose and How to Fill it Out

What is a W-9 Form and its Purpose?

A W-9 form, officially called the Request for Taxpayer Identification Number and Certification, is an IRS document used to collect important tax details from U.S. taxpayers, including individuals, resident aliens, and business entities like corporations, S corporations, or limited liability companies (LLCs). This information allows businesses to accurately report payments to the IRS and issue year-end tax forms, such as a Form 1099-MISC or 1099-NEC, for income tax purposes.

The W-9 tax form should only be completed for U.S. persons (citizens, resident aliens, or U.S.-registered entities) and is not used for foreign individuals or companies. A complete Form W-9 should have the following taxpayer information:

• Legal name and address:  Must match exactly as they appear on the individual’s tax return or the entity’s IRS registration.
• Taxpayer Identification Number (TIN): This could be a Social Security Number (SSN), Employer Identification Number (EIN), or Individual Taxpayer Identification Number (ITIN).
• Business classification: Identifies the taxpayer’s legal status, such as sole proprietor, partnership, C corporation, S corporation, LLC, or trust/estate. For example, a disregarded entity (an entity that is ignored for federal income tax purposes), like a single-member LLC, may be taxed as an individual unless it elects otherwise.
• Tax exemptions: Only if applicable, this section should indicate exemption from backup withholding or Foreign Accounting Tax Compliance Act (FATCA) reporting. This section is often only relevant for certain corporations or government entities.

While the form is completed by contractors, this process can hugely impact your tax return reporting, paying your contractors and compliance with IRS as an employer.

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Understanding the W9 Form Sections

The Form W-9 is made up of five main sections. These sections include: 1) The Personal Information Section, 2) the Taxpayer Classification Section, 3) the Exemptions Section, 4) Part I -TIN, and 5) the Part II - Certification Section. Here’s a breakdown of the main sections and why they matter:

1. Personal Information

This is where the legal name, exactly as it appears on the payee’s tax return, goes. For individuals, that means the name on their Social Security card, and for entities, it’s the registered business name on file with the IRS. If the payee operates under a different business name, it can be added on the second line. 

The mailing address should be complete and accurate as it’s where year-end tax forms, like the Form 1099-MISC or 1099-NEC, will be sent. Even a slight mismatch here can cause IRS notices or misdirected documents.

2. Taxpayer Classification

This section tells the IRS exactly what kind of taxpayer they’re dealing with: individual/sole proprietor, partnership, corporation, S corporation, trust/estate, or limited liability company LLC. For LLCs, it’s not enough to just check “LLC”; you also have to specify the tax classification (C, S, or P for partnership). If the LLC is a disregarded entity (meaning it’s taxed as if it doesn’t exist separately from its owner), the owner’s classification should be used instead. Getting your classification right is critical, as misclassifying here can result in rejected filings and IRS correspondence that’s time-consuming to fix.

3. Tax Exemptions

This is where any tax exemptions from backup withholding to FACTA reporting are recorded. For example, certain corporations, government agencies, or nonprofits may be exempt. If this applies, the payee (whoever is going to receive the income)  must enter the appropriate code. If it doesn’t apply, it is better to leave the field blank, as guessing or entering the wrong code can trigger 24% withholding until the error is corrected.

4. Part I – Taxpayer Identification Number (TIN)

This is the most crucial element of a complete Form W-9. The TIN connects the payments made to the correct taxpayer in the IRS system. For individuals, this is typically a Social Security Number SSN. For entities, it’s an Employer Identification Number (EIN). For certain resident aliens, it may be an Individual Taxpayer Identification Number (ITIN). If the TIN doesn’t match the legal name in IRS records, the payer (also known as “the requester” and is the individual or business that will be making payments) may receive a “B-Notice” and be required to start backup withholding.

5. Part II – Certification

In this final section, the payee signs and dates the form, certifying under penalty of perjury that the information provided is accurate, that they are not subject to backup withholding (unless they’ve been notified otherwise), and that they are a U.S. person. This signature is what turns the W-9 from a data collection sheet into a legally binding tax form. Many tax professionals use this section to remind clients to review the details carefully before signing, as once Part II is complete, the payer can treat the form as final.

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Who Needs to Fill Out a W9 Form?

The W-9 form isn’t reserved for one specific type of worker or transaction; it’s a versatile document that applies across a wide range of business relationships. If you’re paying a U.S. person and that payment is reportable to the IRS, there’s a big chance that a W-9 form will be involved in that process. In such a case, the payee (the person receiving the payment) will need to complete the W-9 form, and the payer (the person making the payment) will need to keep the form on file.

Broadly speaking, there are six common use cases where submitting a W-9 tax form is either required or strongly recommended:

1. Freelancers and independent contractors; Ensures the payer can issue a 1099-NEC and the payee can claim accurate contractor tax deductions without the risk of future disputes.
2. Vendors and suppliers: Keeps B2B transactions properly documented for accounting and tax purposes.
3. Businesses hiring contractors: Serves as the link between the financial and compliance sides of the company by making sure that business owners can pay the contractor without fear of non-compliance and generate accurate 1099 Forms when the tax year closes. 
4. Real estate transactions: Required for commissions, rental income, and other reportable payments in property deals.
5. Financial account holders: Certain accounts, especially in the banking and investment sectors, need a W-9 on file to properly report dividends, interest, or other taxable earnings.
6. Other situations requiring W-9 submission: This includes landlords collecting rent, companies in revenue-sharing agreements, or any situation where a 1099 form must be filed.

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How to Fill Out a W-9 Form: A Step-by-Step Guide

Completing a W-9 Form is a must for individuals and entities that are involved in many financial dealings. We've compiled a comprehensive guide on how to correctly fill out this form. Let's get right into it: 

Why You, as a Global Employer, Need the W-9 Form

Before we get into the how, we must establish the why. If you’re hiring U.S.-based freelancers, contractors, or vendors, the IRS requires you to report payments of $600 or more in a year. That’s where the W-9 comes in. It provides you with their Taxpayer Identification Number (TIN), which ensures your year-end reports (like Form 1099-NEC or 1099-MISC) are accurate.

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How to Request a W-9 from Your Payees

Requesting a W-9 isn’t as daunting as it seems. Here’s how to do it:

1. Start with a friendly email: When you onboard a new U.S. contractor, send them the latest W-9 form along with a clear, friendly message. Something like:
   “Hey [Name], welcome aboard! To get you paid smoothly, please fill out this simple IRS form and send it back by [date]. I’ve attached the form and a helpful guide if you need it.”
2. Give them a deadline: Make it clear when you need it. The sooner you get the W-9, the sooner you can start paying them.
3. Store it securely: Once you have the form, review it to ensure everything is complete. You don’t need to send it to the IRS just yet. Keep it on file for at least four years. The IRS may ask for it during audits.

Walking Through the W-9 Form: What to Expect and Check

Let’s break it down together, step by step. We’ll walk you through the W-9 and highlight what your payees need to do and how you can help them avoid common mistakes. Remember, the latest form (Rev. March 2024) includes some important updates, so be sure you’re using the right version.

• Step 1 - Name (Line 1): Make sure your payee uses their full legal name exactly as it appears on their tax return (e.g., Alex M. Johnson or Johnson Creative Services LLC). A mismatch here could trigger backup withholding.

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• Step 2- Business Name/DBA (Line 2): If your payee has a DBA name (e.g., "Lee Digital Marketing"), this goes in Line 2. If they’re a sole proprietor, they can leave it blank.

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• Step 3 - Federal Tax Classification (Line 3): Your payee will choose their entity type here: individual/sole proprietor, corporation, LLC, etc. If they’re an LLC, it’s important to specify whether they’re taxed as a C corp, S corp, or partnership. Ask them to check their IRS election if unsure.‍
• Step 4 - Foreign Partners/Owners (Line 3b): This is a new addition for 2024. If the payee is a partnership or LLC taxed as a partnership, they need to indicate if they have foreign partners or owners.

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• Step 5- Address (Lines 5 and 6): This is simply their mailing address where you’ll send 1099 forms. It should be a U.S. address, even if they’re remote or international, but still a U.S. tax resident.
• Step 6- TIN (Line 4): This is the payee’s Social Security Number (SSN), Employer Identification Number (EIN), or Individual Taxpayer Identification Number (ITIN). Double-check this number for accuracy!

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• Step 7- Exemptions (Line 4, If Applicable): Most payees leave this blank. If they’re exempt from backup withholding or FATCA reporting, they’ll need to enter a code.
• Step 8 - Certification and Signature (Part II): This is where they sign and date the form, certifying that everything is accurate.

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Requesting W9 Forms from Recipients

Many HR and finance teams treat collecting a W-9 form like an admin chore and something you “eventually get around to” after the contract is signed. However, delaying this process will undoubtedly lead to issues with the IRS, late payments, and unnecessary problems with your contractors and vendors. As the payer, requesting a W-9 form isn’t just a formality that should be ticked off the checklist, but it’s the first step in establishing a compliant financial relationship. 

Guidelines for Properly Requesting W9 Forms

1. Be clear, upfront, and human: Don’t just send a blank form with no context to your contractors. Stress its importance and the reasons why you need it, and when you need it. For example, your request should say something like “It keeps your payments smooth and IRS-compliant” (the why) and “before the first payment goes out” (the when). Including this information builds trust and speeds up cooperation with your contractors. 
2. Make timely requests: Many finance teams suddenly realize that they can’t pay a contractor because there’s no W-9 on file. Avoid the last-minute scramble by making the W-9 part of your onboarding checklist rather than waiting until you’re ready to process a payment. 
3. Give clear, no-jargon instructions: Spell out exactly how to complete the form, what goes where, what not to leave blank, and point out common mistakes (like mismatched names and TINs). If your recipient hesitates, offer help. Five minutes of guidance now can save hours of back-and-forth later.
4. Choose the right collection method: You are handling sensitive data like Social Security Numbers, so security is key. Prioritize security by using a secure online portal, encrypted upload link, or contractor management software to keep these details safe. Your collection method should be determined by both your security needs and the recipient’s comfort level.

Ensuring Compliance and Confidentiality

When you collect a W-9, you’re also handling sensitive personal and financial data. Treat it like the liability and responsibility it is:

• Protect the data: Use encryption, limit access, and store W-9s in secure, access-controlled systems.
• Be transparent: Tell recipients exactly how their information will be used, and direct them to your privacy policy.
• Stay within the law:  If you work with EU-based U.S. taxpayers, remember GDPR rules. Make it a point to align with the local data privacy requirements.

Not prioritizing data security will not only result in fines but can also erode the trust you’ve built with your contractors. 

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Potential Penalties for Not Collecting W-9 Forms

Delaying or overlooking the W-9 collection process can initially seem like a non-issue or a small thing.In reality, the consequences can snowball quickly, leading to much bigger problems down the road. Ignoring this important process can create ripple effects that impact your bottom line, delay payments, and even harm your reputation with contractors. Here's what can go wrong when the W-9 process isn't handled correctly:

1. Reporting Errors and IRS Scrutiny: Without a valid W-9, your 1099 forms may be inaccurate, triggering IRS audits or penalties for mismatched data. This leads to unnecessary administrative work and potential fines.
2.  Mandatory Backup Withholding: If you don’t collect the W-9, you must withhold 24% from payments as backup withholding. This invariably leads to payment delays and unhappy contractors.
3. Legal Consequences and Fines: Failure to collect W-9s can lead to fines from $60 to $330 per form (tax year 2024) and possible legal consequences, especially for data protection violations.
4.  Reputational Damage: This may be even more consequential than legal and financial retribution. Contractors who face delays or withholding will lose trust in your business, damaging relationships and potentially harming your brand’s reputation.
5. Payment Delays and Frustration: Without a W-9, payments to contractors are delayed, creating frustration for both your internal team and the contractor, which can slow down ongoing projects.

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5 Common Mistakes to Avoid When Filling in The W9 Form

Completing the Form W-9 correctly is essential to avoid issues like tax penalties or delayed payments. Let’s go through the top 5 W-9 mistakes you should avoid in 2025 to keep the process (and your business) running smoothly: 

1. Name, Address, or TIN Mismatches: If the name, mailing address, or Taxpayer Identification Number (TIN) doesn’t match IRS records, it can cause delays or backup withholding. For example, one of your freelancers, Maria Lopez, uses "Maria L." instead of her full legal name, which doesn’t match her SSN in IRS records. This leads to automatic withholding. Always ask payees to double-check their details against their tax return. For global employers, ensure the address is U.S.-based for tax purposes. 

2. Incorrect Taxpayer Classification: The payee chooses the wrong classification, like listing an LLC as an individual instead of a business. For LLCs, it’s important to specify how they’re taxed (as a sole proprietorship, partnership, or corporation). Imagine if an LLC owner, John Carter, checked "Individual" instead of "LLC. This would cause an incorrect 1099 filing. 

3. Forgetting the Signature: If the W-9 isn’t signed, it’s invalid, and you can’t process payments without triggering backup withholding. To avoid this, always check the form for a signature before processing any payments. 

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4. Mishandling Exemption Information: Payees either incorrectly claim exemptions from backup withholding or leave the section blank when they qualify for one. For corporations or tax-exempt entities, specific codes need to be filled in. A general rule to follow is that only corporations or tax-exempt entities should fill in exemption details.. It’s best to guide payees to leave it blank unless they’re sure. 

5. Using an Outdated Form: Using a W-9 form from before March 2024 can lead to missing critical details, like new questions about foreign ownership for partnerships or LLCs.

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Download the W-9 Form From the IRS Website

💡Always use the latest version of the W-9 (March 2024) and ask payees to ensure they complete the new Line 3b (if applicable).

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What Happens After Submitting a W-9 Form

Once your payee submits a W-9 form, several important steps kick in, especially when it comes to tax reporting. As a global employer, understanding what happens after the form is submitted will help you stay compliant and avoid costly mistakes. Here’s a quick breakdown of how the W-9 information is used, why it’s essential to keep it updated, and what backup withholding means.

How the W-9 Form Information Is Used

The Form W-9 primarily functions as a way to collect payees’ Taxpayer Identification Number (which could be their SSN or EIN ). This information is needed for tax reporting and ensures accurate income documentation. Here's how it's typically used:

1. Tax Reporting: The main purpose of the W-9 form is to provide your payee’s TIN so you can report payments to the IRS correctly. For example, when you pay a U.S.-based contractor over $600, you’ll use the TIN on the W-9 for 1099 forms.
2. 1099 Forms: If your payee is a freelancer, contractor, or vendor and earns more than $600, you must issue a Form 1099-MISC. The TIN from their W-9 will ensure the correct information is reported to both the contractor and the IRS.
3. Backup Withholding: If there’s an issue with the TIN (like it’s missing or invalid), you may be required to withhold a percentage of the payment (typically 24%) for backup withholding. This ensures the IRS receives its taxes even if there are discrepancies.

Understanding Backup Withholding

Backup withholding is the IRS’s way of ensuring taxes are collected when there’s an issue with a payee’s tax information. For 2025, the rate is set at 24% for payments like contractor fees reported on 1099 forms. If a payee provides an invalid TIN, underreports income, or forgets to sign their W-9, employers must withhold that 24% and send it to the IRS. Non-U.S. payees may face 30% withholding under FATCA unless exempt, so always confirm their status. By doing so, you’ll stay compliant and avoid penalties like the $330 fine for each incorrect 1099.

Updating W-9 Information

Should your business structure, name, or tax details change, so should your W-9 information. Here’s when you should update your W-9:

1. Name or TIN Changes: If your business changes its name or has an error in the TIN.
2. Change in Business Structure: If you switch from a sole proprietorship to a corporation (or vice versa), update your W-9 to reflect the new tax status.
3. Address Changes: While a change of address doesn’t always require an update, keeping it current will prevent any miscommunication or missed notices.

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10 Tips for Completing W-9 Forms 

As a global employer, efficiently managing W-9 forms can save you time and minimize errors. Here are 10 valuable tips to help you manage W-9 forms efficiently:

1. Request W-9 Forms Early: Get W-9 forms from new contractors, vendors, or clients before payments are made or tax forms are due.
2. Maintain an Updated Database: Track W-9 forms in a centralized, easily accessible database (like a contractor management software). Include the name, TIN, and the date the form was updated.
3. Digitize W-9 Forms: Convert paper forms into digital formats for better storage and security.
4. Use Cloud Storage: Keep your digital W-9s on a cloud platform to ensure they’re accessible from anywhere.
5. Automate Reminders: Set up regular reminders to request updated W-9 forms, like annually or after major business changes.
6. Implement Data Security: Ensure that W-9 information is securely stored and only accessible by authorized personnel.
7. Review Tax Reporting Needs: Understand when W-9 information is used for tax filings to ensure accuracy.
8. Seek Professional Guidance: If you’re unsure about W-9 form management, consult a tax expert for best practices.
9. Use Digital Tools: Explore software solutions that help you categorize, search, and manage W-9 forms efficiently.
10. Store Forms Securely: Keep your W-9 records for at least four years to comply with IRS requirements.

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Using Playroll to Ensure Compliance with U.S. Tax Regulations

Playroll makes U.S. tax compliance effortless for global employers by providing expertise in tax regulations across over 180 countries. We ensure that your U.S. contractors and employees are always in compliance with IRS requirements, including contractor management and accurate tax reporting. Our team is available around the clock, with dedicated customer success managers who typically resolve issues within hours.

From paperwork to personalized support, Playroll takes care of the details so you can stay focused on growing your business – without ever worrying about compliance. Book a chat with our team to get started.