Tax planning area with forms, cash, and a calculator.

The ongoing rise of the gig economy and an emphasis on freelance work have altered how the average person files their taxes. Since they are not directly on the company’s payroll, their classification as independent contractors requires a different form come tax season. Instead of the usual W-2 form, independent contractors have to file a W-9 form, and it can create confusion for those unfamiliar with its structure and overall purpose.

Infographic explaining the basiscs of W-9 forms.

What Is a W-9 Form?

A W-9 form allows the IRS to track the information of the multitude of freelancers, gig workers, and self-employed individuals that are rendering services across the United States. The form is given to businesses that offer such employment to distribute the forms to the workers they have employed off of their payroll. They fill out the form and deliver it back to the original business to utilize that information to fill out their 1099 form. If the total amount they have paid the freelancer exceeds $600, it is reported to the IRS.

Why Do We Need To Fill One Out?

When dealing with freelancers, gig workers, and the self-employed, businesses do not have to take out Social Security and Medicare taxes or withhold income taxes on their wages. Those taxes will be taken out of the worker’s taxes. The business that contracted you out will have your tax ID number to fill out their information accurately. The IRS then uses this information to know how much money they need to take out of your taxes when tax season comes. 

What You Need To Know When Filling Out the W-9 

When you’re filling out the form, there is some essential information that you will need so you can fill it out correctly. You will need to select the type of business you run — whether yourself, a sole proprietorship, single-member LLC, S-Corp, C-Corp, a Partnership, Trust, Estate, or a full LLC — for tax purposes. Additionally, there is a section in the W-9 that specifically covers Exemptions. These codes apply to specific entities, not individuals, that do not have to worry about backup withholding or the reporting requirements set forth by the Foreign Account Tax Compliance Act. 

By filling out the W-9 form, the people who rely on the newfound gig economy to stay afloat can ensure that their taxes are appropriately accounted for and that their contributions to federal services like Medicare and Social Security reach their proper destination. With Superior Tax Services’ help, you can learn more about the importance of the W-9, how to fill it out, and get the assistance you need this coming tax season to ensure all of your information is in order. Contact our team today to get started preparing for the 2021 tax season!