Are you a freelancer or a contractor and are a little bit confused about what your obligations are and why you should fill out a W9 form? If the answer is yes, you’re in the right place.
The first thing you should know is that when companies hire contractors online, they don’t pay taxes or register them with Social Security as they usually do for their employees. So, independent contractors or freelancers are responsible for paying their tax obligations as the government is still interested in knowing how much they are receiving to guarantee that they are paying their taxes.
But, what the $%&! is a W9 form?
Don’t worry, companies use the W9 form mainly to know everything about you, have all your information and keep an eye on you every… single... day…
Just kidding, let me explain it in an easy way. When a business pays a contractor $600 or more during a fiscal year, it has to report these payments to the Internal Revenue Service, your name, address and Social Security number or tax identification, stuff like that to complete your information and provide them your information through the W9 form.
What information should the W9 form contain?
These are the common data that you must collect and take into account before filling out the form:
1. Name of the person or business name.
2. What tax classification does the employee decide to give of income.
3. Worker's address.
4. User identification data. It can be a social security number or employer ID number.
Why is this format so important?!
Normally the W9 is needed under the following circumstances:
Business-contractor/freelance agreement: When a business needs to supply details of the person who fulfilled a business service. Then again, this includes a name, address and tax identification number (TIN).
Financial institution-customer agreement: Financial institutions often rely on the W9 to record the customer’s name, address and TIN. Although it's not necessary to fill out the W9 to open up a customer account, financial institutions often use it because it’s a useful format for recording a customer’s details.
STOP! When should I NOT fill out a W-9?
When the company has registered you as an employee and not as an independent contractor, obviously, but also if the company does not have a valuable reason for filling in the form. Be careful around phishing scammers!!!
If the company has a legitimate reason for filling out the form and you refuse, the company can take a percentage of your payment and withhold it as taxes, always remember that. Take it easy, if you have doubts about the origin of the format, talk to your company so that they can inform you about the importance and veracity of this format.
Now you know a little more about this format and why it is important to fill it out and find out about its existence, but if you are still a bit lost or want to know more about the advantages of independent contractor and why companies are hire them, read our blog "5 reasons for companies to hire remote workers"
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