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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.

“This blog post, along with comments that may follow, should not be considered tax advice. Before you make final tax or financial decisions, please secure a professional tax advisor to give you advice about your unique situation. To secure Jason as your accountant, please click on the ‘Services’ link at the top of the page.”