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You've done it! You've landed your first consulting job and you're unbelievably excited, but you're new client has asked you to send along something called a W-9 form before you can be paid. Don't worry. We're here to help. Let's take a minute to learn more about what a W-9 is, why your new client needs it, and what you need to do to fill it out properly.
What is it and how's it used?
A W-9 form is used to collect information about you, or your business, that can be used by the person paying you to complete an informational report for the IRS, such as a 1099-MISC form.
The IRS requires your customer or client to report income paid to you on such a form if they pay you $600 or more over the course of a tax year.
As a result, requiring you to complete the form W-9 shows that the person paying you is living up to their end of the bargain with the IRS and that income paid to you will be reported to the agency -- so, no funny-business when it comes tax time!
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What information do I need to complete it?
A W-9 form is a pretty straight forward form and the information that is required on it shouldn't cause you to worry.
At the top of the W-9 are a series of boxes in which you'll include your name, or your business name (if there is one!), the type of business you are for tax filing purposes, and your address or your business' address.
Of these questions, the only one that may give you pause is the one that asks you to explain what type of taxpayer you are.
You are given seven choices and only one can be checked. If you haven't established a separate business, such as by incorporating, then simply check the first box. If you are a partnership, or have set yourself up as a separate business, then you'll need to check one of the other boxes. If you're going to be doing the work as an LLC, then you'll need to fill in whether or not you'll be taxed as an individual, a corporation, or as a partnership. If you're not sure how you'll be taxed, then place a quick call to your accountant and find out.
Once you've completed the top of the W-9 form, you'll need to fill in Part 1, which asks you for your social security number or your tax identification number. A tax identification number is given to you by the IRS if you've set up business to do the work, such as an LLC, and the tax identification number that you enter must match the number for the name that is listed at the top of form W-9. If you have set up an LLC or incorporated, but haven't gotten your tax identification number yet, don't worry. You can apply for itand then write "applied for" in the space in which you'd normally write the number.
Once you've completed that section, you'll simply be asked to certify that the information you're providing is correct by signing in part II.
And another thing ...
If you're still uncertain how to complete your W-9, the form typically comes with detailed instructions, including examples that you can reference. If you don't have those instructions, you can view them online.
Also, you need to know that filling out and submitting a W-9 to the person paying you will usually mean that no money will be withheld that can be applied to your tax bill when it's tax time. That means that you'll receive the full amount that your client is paying you, but it also means that you run the risk of a big surprise when you file your taxes. To avoid that risk, make sure that you plan ahead by socking away enough money in a safe place to pay Uncle Sam.
The article What Is a W-9 Form and Why Do I Need to Complete It? originally appeared on Fool.com.
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