Taxpayer asks: In doing some side work, a client sent me a W-9 to fill out and return. Why would they do that, and why is this the first time I’ve received one from a client? Is my new client somehow reporting this income or putting it down as an expense, maybe?
Taxgirl says: Independent contractors don’t usually have anything withheld on their checks, like employees do. However, if you refuse to give your tax ID or if you are a foreign taxpayer (and certain other taxpayers), the person paying you is required to withhold taxes. So, basically the payer ask you to swear that you’re not one of those people by completing the form W-9 (or form W-8 for foreign taxpayers and other special circumstances). You’d know if you were subject to back-up withholding.
Think of it as a CYA thing for the companies. Companies who expect to pay out over $600 (and thus issue a form 1099) or big companies who have lots of payees find it easier for record keeping purposes to make everyone fill one out do it. It’s just for record keeping and to help them with reporting later in the year.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the Taxgirl!
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