W-9 Form: What It Means for Employers

What it means in practice

What the form does. The March 2024 form explains that a requester who must file an information return with the IRS needs the payee's correct taxpayer identification number (TIN) to report the amount paid. That TIN may be a Social Security number, an individual taxpayer identification number (ITIN), an adoption taxpayer identification number (ATIN) or an employer identification number. The form lists examples of the returns involved, including Forms 1099-NEC, 1099-MISC, 1099-INT, 1099-DIV, 1099-K, 1099-S, 1099-B and 1098. Employers meet the W-9 most often when they pay vendors and an independent contractor whose fees go on Form 1099. For the kinds of numbers themselves, see taxpayer identification number (TIN).

Who completes it. The form says to use it only if you are a U.S. person. For federal tax purposes that means a U.S. citizen or resident alien; a partnership, corporation, company or association created or organized in the United States or under its laws; an estate other than a foreign estate; or a domestic trust. For a disregarded entity with a U.S. owner, the owner, not the entity, provides the W-9. If the owner of a disregarded entity is a foreign person, the owner completes a Form W-8 instead, even if it has a U.S. TIN. A resident alien relying on a tax treaty "saving clause" exception still uses Form W-9 and attaches a statement supporting the exemption.

Lines 1 and 2: names. Line 1 is required and should match the name on the payee's tax return. A sole proprietor enters his or her individual name on line 1 and any business or "doing business as" name on line 2. A disregarded entity enters its owner's name on line 1 and its own name on line 2; the instructions say the line 1 name should never be a disregarded entity.

Line 3a: federal tax classification. The payee checks one of seven boxes: individual/sole proprietor, C corporation, S corporation, partnership, trust/estate, LLC, or other. An LLC that is not disregarded checks the LLC box and enters C, S or P for its tax classification. A disregarded LLC instead checks the box for its owner's classification.

Line 3b: foreign owners. This line, added in 2024, applies to a partnership, trust or estate (including an LLC taxed as a partnership) that gives the W-9 to another partnership, trust or estate in which it holds an interest. It is checked if the payee has any direct or indirect foreign partners, owners or beneficiaries. The Requester instructions say a flow-through entity receiving the form may then need to report on Schedules K-2 and K-3 (Form 1065).

Line 4: exemptions. Line 4 has two codes. The exempt payee code (1 to 13) identifies payees exempt from backup withholding, such as tax-exempt organizations, government bodies and corporations. Individuals, including sole proprietors, generally are not exempt. Corporations are not exempt for payment card and third-party network payments, and payments to a corporation for attorneys' fees, gross proceeds paid to an attorney, medical and health care payments and services paid by a federal executive agency remain subject to backup withholding. The FATCA exemption code (A to M) applies only to accounts maintained outside the United States by certain foreign financial institutions, so a payee with only U.S. accounts may leave it blank.

Lines 5 to 7 and Part I. Line 5 is the address where the requester will mail information returns; a payee whose address has changed writes "NEW" at the top. Part I holds the TIN, which must match the line 1 name to avoid backup withholding. A sole proprietor with an EIN may enter either the SSN or the EIN. A single-member LLC that is disregarded enters its owner's SSN or EIN, while an LLC taxed as a corporation or partnership enters its own employer identification number (EIN).

Part II: the certification. By signing under penalties of perjury, the payee certifies that the TIN is correct (or a number is being awaited), that the payee is not subject to backup withholding, that the payee is a U.S. citizen or other U.S. person, and that any FATCA code entered is correct. A payee the IRS has notified of backup withholding for unreported interest or dividends must cross out item 2. Whether a signature is required depends on the payment. For "other payments" made in the course of the requester's trade or business, such as rents, royalties and payments to a nonemployee for services, the payee must give a correct TIN but need not sign unless previously notified of giving an incorrect TIN. Interest, dividend, broker and barter accounts opened after 1983 require a signature.

When backup withholding applies. The IRS Backup withholding page describes a 24 percent withholding taken from future payments. The Requester instructions list the triggers: the payee fails to furnish a TIN; the IRS notifies the payer that the TIN is incorrect; the IRS notifies of payee underreporting of interest or dividends; or the payee fails to certify, when required, that it is not subject to backup withholding. Covered payments include contractor fees, rents, royalties, interest and dividends. Wages, retirement distributions, real estate transactions and canceled debts are excluded. A payer that fails to withhold when required may become liable for the uncollected amount. Backup withholding is reported on Form 945, and the General Instructions say a 1099 must show it even if the payment is below the normal reporting threshold.

Relying on a W-9. A requester may rely on a claimed exempt payee code unless it actually knows the code or classification is invalid or inconsistent. Under Treasury regulation section 31.3406(h)-3(e), reliance is not reasonable if the form lacks a name and TIN or is not signed and dated.

W-9 versus W-4 versus W-8BEN. The three forms go to different people for different purposes. Form W-4 is completed by an employee so the employer can withhold federal income tax from pay (IRS About Form W-4). Form W-9 is completed by a U.S. payee, typically a non-employee, so the payer can report payments and know when backup withholding applies; wages are not subject to backup withholding. Form W-8BEN goes to the withholding agent or payer from a foreign individual who is the beneficial owner of an amount subject to withholding (IRS About Form W-8BEN). Pub. 1281 says a nonresident alien is subject to backup withholding unless a signed W-8BEN is on file.

Substitute and electronic W-9s. The Requester instructions allow a substitute form whose content is substantially similar to the official one. It must not require the payee to agree to unrelated provisions in order to sign; if one signature line covers both, the certifications must stand out and a set statement must appear above the signature. The regulations let a payor refuse a form not on its own version only if it gives the payee an acceptable form at once or within 5 business days. Requesters may also accept W-9s electronically, including by fax. The system must ensure the information received is what was sent, make reasonably certain the submitter is the person named on the form, provide the same information as the paper form, be able to supply a hard copy if the IRS asks, and end with the payee's electronic signature under penalties of perjury.

CP2100 notices and B-notices. When filed information returns contain missing or mismatched name/TIN combinations, the IRS sends the payer a CP2100 or CP2100A notice with a listing. Pub. 1281 (Rev. 12-2023) explains the response. For an incorrect TIN that agrees with the payer's records, the payer sends a First "B" Notice with a Form W-9 within 15 business days of the notice date or receipt, whichever is later, and must begin backup withholding no later than 30 business days after that date if no signed W-9 comes back. If a second notice for the same account arrives within three calendar years, a Second "B" Notice goes out without a W-9, and the payee must provide validation, such as a copy of the Social Security card or IRS Letter 147C for an EIN. The correct TIN may not be solicited by telephone. For missing TINs, Pub. 1281 instead requires backup withholding plus an initial and up to two annual solicitations.

TIN Matching. The Requester instructions describe IRS TIN Matching, an e-services tool that lets eligible payers check name and TIN combinations before filing.

Recordkeeping and confidentiality. Treasury regulation section 31.3406(h)-3(g) requires a payor that receives a W-9 related to backup withholding for an account opened after 1983 to retain it for 3 years from the date the account is opened or the instrument is purchased. Separately, the General Instructions say to keep copies of filed information returns for at least 3 years from their due date, or 4 years if backup withholding was imposed. The General Instructions require requesters to keep W-9 identity information confidential and use it only to comply with the tax laws, and the form warns of civil and criminal penalties for misuse of TINs.

Where states differ. Form W-9 is a federal form, but states can add their own withholding. For example (not a complete list), the California Franchise Tax Board's Backup withholding page says a payer required to remit federal backup withholding to the IRS must, with limited exceptions, also withhold 7 percent of the reportable payment and remit it to California, and that this backup withholding cannot be reduced or waived. Other states may have their own rules.

Worked example 1: a contractor with no TIN. A company pays a U.S. contractor a $3,000 fee, and the contractor has not furnished a TIN. Backup withholding at 24 percent is $720 ($3,000 x 0.24), so the contractor receives $2,280. The $720 is reported on Form 945 and on the contractor's 1099-NEC. If the company is also subject to California's rule, an additional 7 percent, or $210, is withheld for the state.

Worked example 2: "Applied For." A newly formed partnership returns a signed W-9 with "Applied For" in Part I and invoices $1,000 for services. Because the 60-day awaiting-TIN rule covers only interest, dividends and certain readily tradable instruments, the fee is subject to backup withholding immediately: $240, leaving $760 paid, until the TIN is provided.

Q: Does a W-9 expire? The form states no expiration date. It says a payee must furnish a new W-9 if the name or TIN on the account changes and must update a requester if it stops being an exempt payee, for example a C corporation that elects S corporation status. Refresh timing is a business policy question; see the document tracking link below.

Q: Do employees complete a W-9? Not for their wages. Employees give the employer a Form W-4, and wages are excluded from backup withholding under the Requester instructions.

Q: What if a W-9 returned after a First B-notice shows the same TIN? Pub. 1281 says to keep that W-9 on file to show the payee certified the name/TIN combination and not to backup withhold on that first notification.

This entry describes what Form W-9 is and how the IRS sources describe it. It does not decide how any payee should complete the form or whether backup withholding applies in a specific case.

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