![]() ![]() If you don’t work as an employee, you’ll have your earnings reported on a Form 1099-NEC and will need to prepare a W-9.įorm W-9 will have your personal identifiable information and states whether you’re subject to backup withholding. When beginning to work as either an independent contractor or an employee, you should expect to fill out some paperwork providing your personal identifiable information.Īs an independent contractor, vendor, freelancer or other individual receiving nonemployee compensation, you typically do not work for the person or business as an employee. If you receive a 1099 form stating you’ve had taxes withheld through backup withholding, be sure to report this as federal income tax withheld on your income tax return. You can usually prevent backup withholding by supplying the correct information when requested and paying an appropriate amount of taxes each year. You fail to certify that you’re not subject to backup withholding.The IRS notifies the payer to withhold taxes because you have a history of underreporting your income on your tax return (the IRS typically will only do this after it has mailed you four notices over at least a 120-day period).You fail to supply your TIN or provide an incorrect TIN.Specifically, you may be subject to backup withholding and the payer must withhold at a flat 24% rate when: Further, individuals or businesses can become subject to backup withholding for failing to report interest, dividend or patronage dividend income. ![]() Taxpayers may be subject to backup withholding when failing to supply a correct taxpayer identification number (TIN) or if the IRS believes that they owe them money and they aren’t able to collect it any other way. Payers may be required to withhold taxes to ensure that the IRS will receive income taxes that are owed to them. What is backup withholding?īackup withholding is money taken out of your pay and paid to the IRS from income payments which otherwise wouldn’t be subject to withholding. Failing to do so could make you required to perform backup withholding. Therefore, before starting any work with a person or business, be sure to ask for a Form W-9 if they haven’t already provided you with one. Failing to do so could prove troublesome after beginning the work. When you begin working with a contractor or freelancer, you should request that he or she complete a Form W-9 prior to starting any engagement. When it’s for your business, the taxpayer identification number (TIN) is your employer identification number, or EIN. TurboTax Tip: If you submit the W-9 as an individual, your TIN is usually your Social Security number. The individual or business you are doing business with uses the W-9 to collect some of your personal information, the most important of which is your taxpayer identification number (TIN). You will usually submit a W-9 form when you engage with a company where reporting information to the IRS might be necessary, such as receiving payments for services you provide as an independent contractor, paying interest on your mortgage or even contributing money to your IRA account. Likewise, banks, brokerage firms and other payers typically ask for a completed W-9 to prepare your 1099s to report items such as interest, dividends, cancellation of debt and more. TurboTax Tip: Companies who engage you as a contractor or make payments to you for services you provide will likely ask for a completed W-9. That person keeps the form on file and uses this information to prepare other returns, such as 1099 Forms and 1098 Forms, as well as to determine whether federal tax withholding is necessary on the payments you receive. However, the requester has no obligation to file the W-9 with the IRS. The person or business paying you is responsible for requesting the W-9 Form from you. You will usually submit a W-9 when you engage in most taxable transactions that need reporting to the IRS.The person or business you do business with uses the W-9 to collect some of your personal information like your name, address and taxpayer identification number (Social Security numbers for individuals and employer identification numbers, or EINs, for businesses).Form W-9 provides personal identifiable information to a person or business used for reporting income paid to self-employed people like independent contractors, freelancers, vendors or other customers.If you have your own business or work as an independent contractor, freelancer or gig worker (in other words, self-employed), a client may request that you fill out and send a W-9 so they can accurately prepare your 1099-NEC form, report the payments they make to you at the end of the year and know whether or not you are subject to backup withholding.
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