When and How to Fill Out a Form W-9

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Today I want to write about Form W-9 and when it’s used. My discussion will focus on the most-common usage of Form W-9, which is to collect information from contractors so a Form 1099 can be prepared. I will not be getting into other uses of the W-9.

Who Should Fill Out a W-9

I advise any business with contractors to have those contractors fill out a W-9. The W-9 will help the business:

  1. Determine if a 1099 needs issued
  2. Gather the name, address and identification number needed to prepare the 1099

Basic Scenario

Let’s say your business hires a contractor. Let’s use our good friend Joe the Window Washer as the contractor. Your business hires Joe to wash the windows of your office building.

It would be a good idea for you to have Joe fill out a Form W-9.

If Joe is a Sole Proprietor

Let’s say Joe is a sole proprietor. Joe will put his name on line 1, probably leave line 2 blank unless he has a trade name he wants to use, and he’ll check the “individual/sole proprietor” box on line 3. He’ll put his Social Security Number in Part I.

This also applies if Joe is a single-member LLC and has not made any elections to be taxed as a corporation.

If Joe is a Corporation

Let’s say Joe is a corporation — not an LLC taxed as a corporation (we’ll get to that next). Joe will put the corporate name in line 1, leave line 2 blank, and then check either the “C Corporation” or “S Corporation” box on line 3.

If Joe is an LLC Taxed as a Corporation

Let’s say Joe is a single-member LLC but he’s made an election with the IRS to be taxed as a sole proprietor. In this case, Joe will put his LLC name on Line 1, probably leave line 2 blank, and then he’ll check the “Limited liability company” box on Line 3, and he’ll enter either a “C” or an “S” to indicate whether he’s a C-corp or an S-corp.

How Does the Payor Use this Information?

Let’s step into the shoes of your business which pays Joe. The W-9 will help you determine whether or not you need to issue Joe a 1099.

In our first example, where Joe is a sole proprietor, you would issue him a 1099. In the other examples, where Joe is taxed as a corporation, you would NOT issue him a 1099 because you (generally) don’t send 1099s to corporations.