For any business that deals with independent contractors and freelance workers, Form W-9 is a requirement. To file taxes, they need to collect a W-9 from people or small businesses that pay more than $600 each for completed work.
It is a form completed by independent contractors and freelancers to comply with tax laws and gather information for the Internal Revenue Service (IRS). It shows the name, address, and Taxpayer Identification Number (TIN), a Social Security Number (SSN), or an Employee Identification Number (EIN).
Form W-9 helps report income at the end of the year and determines whether backup withholding applies to you as a payee. For a business that hires using independent contractor agreements, they might want you to complete W-9 forms. Additionally, a gig worker, independent contractor, freelancer, or company that receives interest or dividends may need to complete and send a single-member LLC W-9, so the payer can prepare a 1099 form.
Here is some information to help you understand the Form W-9 from the IRS website.
What Is a W-9 Form Used For?
Independent contractors and freelance agents typically handle the Form W-9 on behalf of a third party and rarely file it with the IRS, usually keeping it as a verification document. W-9 information and any payments made are recorded on 1099. It is officially called the W-9 Request for Taxpayer Identification and Certification, but it differs from all other tax forms.
If you're required to file an information return with the IRS, let the person know your correct Taxpayer Identification Number (TIN). A W-9 form is commonly needed for the following four situations:
- Opening a new bank account. This is not always a requirement, but oftentimes it is.
- You are a contractor, freelancer, or consultant expecting to be paid more than $600 in one tax year by one client. Before sending you a Form 1099-MISC, they'll need a completed W-9 from you (the payee). You'll have to show that to the IRS when you file your income tax return.
- When someone forgives or cancels a debt you owe them, the IRS will require Form 1099-C. To complete the process, they'll need your W-9.
- If you sell your home or your bank or financial institution reports interest income, distributions, or proceeds from real estate transactions, they'll need a W-9 form from you.
W-9 LLC Tax Classification
Since LLCs are hybrid entities that combine the advantages of different business forms, they have multiple classification options for tax. The flexibility of LLCs extends to their tax classification as well. IRS tax law considers LLCs hybrids not as separate, unique businesses.
Tax classifications are just indicators of the entity's tax treatment; however, the entity type remains the same. Corporation taxation classification does not result in an LLC becoming a corporation. All non-tax purposes remain LLCs, but taxation is like a corporation.
Despite these changes, owners are still called members, and the LLC Operating Agreement continues to govern the business. A FEIN vs. an EIN is the same thing since the Internal Revenue Service (IRS) uses both terms interchangeably to describe nine-digit numbers for tax.
- Disregarded Entity—Under tax law, LLCs fall under the pass-through entity category. For tax, LLCs and their owners will be treated like sole proprietorships. A single-member LLC owner, under this classification, is the same as an individual freelancing or operating a business in their name for tax purposes.
-
Partnership—Multi-Member LLCs can be taxed as partnerships. Similarly, LLCs taxed as partnerships are treated as pass-through entities and tax their profits and losses at the individual level. In this classification, LLC owners are still taxed on their percentage of profits, even if they do not receive the profits.
Unlike disregarded entities, partnerships need to file specific reports with the IRS even though they are not taxed. The LLC must also prepare certain forms to assist owners in filing their documents. Annual tax returns are filed with a "doing business as" (DBA) whose structure is a sole proprietorship.
- C Corporation and S Corporation Classification—Corporations can be treated as LLCs for tax, even if they are single-member LLCs. Here, both LLCs and individuals must report. As long as S-corporations are elected, profits made by the corporations will not be taxed at the federal level. Instead, LLC owners will include them on their tax returns.
The LLC members treated as a disregarded entity or as a partnership must complete Form 1065 and receive Schedule K-1s detailing their profits and losses.
You do not have to pay taxes on funds spent on your business, regardless of what classification you choose. Starting-up costs, travel costs, equipment expenses, advertising, and other deductible expenses can be deducted, reducing the income tax percentage on your income.
Filling Out a W-9 for an LLC
- Enter your full name and the legal name of your LLC on the first two lines of the form. Ensure that the name you enter here matches the name you listed on your LLC formation documents in your state.
- Check the box next to your tax classification as described above. Check the "individual/sole proprietor" box if you are taxed as a disregarded entity. Multi-owner LLCs are automatically taxed as partnerships and should select the LLC box, denoting a partnership with a letter P.
-
Your employer identification number (EIN) should be included on the W-9 if you have one. If you have employees, are taxed or operate as a corporation, or must file alcohol, firearms, tobacco, or excise taxes, you need this taxpayer identification number (TIN).
You can get an EIN from the IRS by filing Form SS-4 online. In the absence of an EIN, enter your Social Security number.
- In the next step, enter your complete address. Part 2 contains three statements you must read and sign to verify their accuracy. You acknowledge that your EIN or SSN is correct as entered, that backup withholding does not apply to you, and that you are a U.S. citizen or taxpayer.
- Ensure that the W-9 goes to the company that requested it, not to the IRS. After filing its tax return, the payer will send a copy to the IRS.
How to Get W-9 for LLC
You can download, fill out and print the W-9 forms free from the IRS website. Sometimes, requesters prefer payees to submit digital information online for W-9 automation.
Don't trust everyone who asks you to send a W-9 other than a client, bank, or financial institution. Identification theft can occur when this type of information is shared.
In most cases, the person or business paying you will ask you for the W-9 Form, and the requester is not obligated to file an IRS W-9. They keep the form on file and use it to prepare 1099s and 1098s and determine whether tax withholding is required on your payments.
Start an LLC Operating Agreement
Helpful Resources:
Form W-9 (Rev. October 2018) | IRS
Iorm 1099-MISC | IRS
Form 1099-C | IRS
For any business that deals with independent contractors and freelance workers, Form W-9 is a requirement. To file taxes, they need to collect a W-9 from people or small businesses that pay more than $600 each for completed work.
It is a form completed by independent contractors and freelancers to comply with tax laws and gather information for the Internal Revenue Service (IRS). It shows the name, address, and Taxpayer Identification Number (TIN), a Social Security Number (SSN), or an Employee Identification Number (EIN).
Form W-9 helps report income at the end of the year and determines whether backup withholding applies to you as a payee. For a business that hires using independent contractor agreements, they might want you to complete W-9 forms. Additionally, a gig worker, independent contractor, freelancer, or company that receives interest or dividends may need to complete and send a single-member LLC W-9, so the payer can prepare a 1099 form.
Here is some information to help you understand the Form W-9 from the IRS website.
What Is a W-9 Form Used For?
Independent contractors and freelance agents typically handle the Form W-9 on behalf of a third party and rarely file it with the IRS, usually keeping it as a verification document. W-9 information and any payments made are recorded on 1099. It is officially called the W-9 Request for Taxpayer Identification and Certification, but it differs from all other tax forms.
If you're required to file an information return with the IRS, let the person know your correct Taxpayer Identification Number (TIN). A W-9 form is commonly needed for the following four situations:
- Opening a new bank account. This is not always a requirement, but oftentimes it is.
- You are a contractor, freelancer, or consultant expecting to be paid more than $600 in one tax year by one client. Before sending you a Form 1099-MISC, they'll need a completed W-9 from you (the payee). You'll have to show that to the IRS when you file your income tax return.
- When someone forgives or cancels a debt you owe them, the IRS will require Form 1099-C. To complete the process, they'll need your W-9.
- If you sell your home or your bank or financial institution reports interest income, distributions, or proceeds from real estate transactions, they'll need a W-9 form from you.
W-9 LLC Tax Classification
Since LLCs are hybrid entities that combine the advantages of different business forms, they have multiple classification options for tax. The flexibility of LLCs extends to their tax classification as well. IRS tax law considers LLCs hybrids not as separate, unique businesses.
Tax classifications are just indicators of the entity's tax treatment; however, the entity type remains the same. Corporation taxation classification does not result in an LLC becoming a corporation. All non-tax purposes remain LLCs, but taxation is like a corporation.
Despite these changes, owners are still called members, and the LLC Operating Agreement continues to govern the business. A FEIN vs. an EIN is the same thing since the Internal Revenue Service (IRS) uses both terms interchangeably to describe nine-digit numbers for tax.
- Disregarded Entity—Under tax law, LLCs fall under the pass-through entity category. For tax, LLCs and their owners will be treated like sole proprietorships. A single-member LLC owner, under this classification, is the same as an individual freelancing or operating a business in their name for tax purposes.
-
Partnership—Multi-Member LLCs can be taxed as partnerships. Similarly, LLCs taxed as partnerships are treated as pass-through entities and tax their profits and losses at the individual level. In this classification, LLC owners are still taxed on their percentage of profits, even if they do not receive the profits.
Unlike disregarded entities, partnerships need to file specific reports with the IRS even though they are not taxed. The LLC must also prepare certain forms to assist owners in filing their documents. Annual tax returns are filed with a "doing business as" (DBA) whose structure is a sole proprietorship.
- C Corporation and S Corporation Classification—Corporations can be treated as LLCs for tax, even if they are single-member LLCs. Here, both LLCs and individuals must report. As long as S-corporations are elected, profits made by the corporations will not be taxed at the federal level. Instead, LLC owners will include them on their tax returns.
The LLC members treated as a disregarded entity or as a partnership must complete Form 1065 and receive Schedule K-1s detailing their profits and losses.
You do not have to pay taxes on funds spent on your business, regardless of what classification you choose. Starting-up costs, travel costs, equipment expenses, advertising, and other deductible expenses can be deducted, reducing the income tax percentage on your income.
Filling Out a W-9 for an LLC
- Enter your full name and the legal name of your LLC on the first two lines of the form. Ensure that the name you enter here matches the name you listed on your LLC formation documents in your state.
- Check the box next to your tax classification as described above. Check the "individual/sole proprietor" box if you are taxed as a disregarded entity. Multi-owner LLCs are automatically taxed as partnerships and should select the LLC box, denoting a partnership with a letter P.
-
Your employer identification number (EIN) should be included on the W-9 if you have one. If you have employees, are taxed or operate as a corporation, or must file alcohol, firearms, tobacco, or excise taxes, you need this taxpayer identification number (TIN).
You can get an EIN from the IRS by filing Form SS-4 online. In the absence of an EIN, enter your Social Security number.
- In the next step, enter your complete address. Part 2 contains three statements you must read and sign to verify their accuracy. You acknowledge that your EIN or SSN is correct as entered, that backup withholding does not apply to you, and that you are a U.S. citizen or taxpayer.
- Ensure that the W-9 goes to the company that requested it, not to the IRS. After filing its tax return, the payer will send a copy to the IRS.
How to Get W-9 for LLC
You can download, fill out and print the W-9 forms free from the IRS website. Sometimes, requesters prefer payees to submit digital information online for W-9 automation.
Don't trust everyone who asks you to send a W-9 other than a client, bank, or financial institution. Identification theft can occur when this type of information is shared.
In most cases, the person or business paying you will ask you for the W-9 Form, and the requester is not obligated to file an IRS W-9. They keep the form on file and use it to prepare 1099s and 1098s and determine whether tax withholding is required on your payments.
Start an LLC Operating Agreement
Helpful Resources:
Form W-9 (Rev. October 2018) | IRS
Iorm 1099-MISC | IRS
Form 1099-C | IRS
Most Popular Posts
An eviction filed by your landlord hurts your credit report. It is also held as a public record and other landlords can view your previous rental...
As a property owner knowing squatter rights is crucial. These aren’t your ordinary delinquent tenants and knowing how the law treats them is...