This part of the form may seem straightforward, but it’s often where mistakes occur. It’s easy to overlook, leading individuals to provide a name that doesn’t match their legal one or, if completing the form for a business, not using the exact name on record with the IRS.
Ensuring the correct name is provided on Form W-9 is crucial. Here’s why:
Form W-9, officially titled ‘Request for Taxpayer Identification Number and Certification’, is commonly used by individuals or businesses to gather taxpayer information, like independent contractors or freelancers, for tax reporting.
In this blog, we’ll dive into the significance of Form W-9 and offer practical solutions for ensuring the correct name is provided, whether for an individual or a business.
An Overview of Form W-9
Form W-9 is an IRS form that payers use to obtain critical data, including name, address, and certified Taxpayer Identification Number (“TIN”), from U.S. payees (people or organizations) with whom they do business. Obtaining the taxpayer identification number (TIN) and other information is essential to reporting income on Form 1099 and other tax forms, which is the goal of the W-9 Form.
Note: In this case, a ‘U.S. payee’ is often a taxpayer in the United States. An entity incorporated or registered in the United States, as well as U.S. citizens or permanent residents, may be referred to by this word.
Importance of Form W-9
For instance, if a business hires a freelancer and pays them throughout the year, they may be obligated to issue a 1099 form at year-end. The freelancer relies on this 1099 to accurately report their income on their tax return. Here, the business acts as the ‘payer,’ while the freelancer is the ‘payee.’
Prior to issuing the 1099 form, it’s essential for the business to request a Form W-9 from the freelancer at the onset of their business relationship. This step enables the business to gather the required information to accurately complete the 1099, ensuring proper tax reporting for both parties.
As evident, any inaccuracies on Form W-9 can result in corresponding errors on the 1099, posing challenges for both the business (payer) and the freelancer (payee). Incorrect information on a W-9 can complicate income reporting and verification processes for the IRS.
Key Considerations: Steps for Ensuring the Name is Correct
Here are the following points to be considered while reporting your name on Form W-9, which includes:
- Enter the name on tax returns:
According to the IRS, when completing Line 1 of Form W-9, inputting your legal name as it appears on your income tax return is crucial. It’s mandatory to fill in this section, avoiding nicknames, abbreviations, or variations unless they’re part of your legal name. The legal name provided on the W-9 confirms to payers that you’re categorized as a U.S. Citizen or defined as a Resident alien.
- DBA Name: Doing Business As
Now, let’s explore the next important part of reporting the name: the Doing Business name, also known as the ‘DBA Name.’ Consider this scenario: Suppose you’re a sole proprietor who uses a business name for marketing purposes instead of your personal name. In Line 2 of Form W-9, you should enter this business name or disregarded entity name if it’s different from what was provided in Line 1.
- Name Changes:
When you undergo a name change and need to officially update it with the Social Security Administration (SSA), you should follow specific steps when filing Form W-9:
- Considering Name Changes: If you’ve changed your name without updating it with the SSA, stick to the name on your tax return. That means using your first name and last name as they appear on your social security card (which might include your original first name and your new last name), along with any other required information.
For instance, if your legal name is “John Smith” and you’ve changed it to “John Smith Jones,” you should write John Smith (first name, last name) and Jones (new last name) on Line 1 of Form W-9.
- Spelling Errors:
Take a moment to verify the legal name you enter on Form W-9. Mistakes or discrepancies can cause problems with tax reporting and processing. Avoid spelling errors when filling out your legal name. It’s best to verify your name for accuracy by providing legal identification. Once submitted, correcting spelling mistakes later isn’t possible, potentially leading to penalties or rejection of your 1099 forms by the IRS.
When and Why Should W-9 Be Requested?
When a business hires an independent contractor, they must fill out a Form W-9. Before being paid, contractors must correctly complete the form and give a copy to the company. It is vital to remember that the IRS may require the business to deduct 24% of the payment for federal taxes if the contractor does not present a W-9 form.
If the contractor makes over $600 during the tax year, they must also complete a W-9 form. This revenue may come from commissions, salaries, or other sources.
Form W-9 collection should be essential to the business onboarding procedure to obtain correct data, regardless of the company’s size or the amount paid to the vendor.
Go Electronic – Simplify W-9 Form Filing!
Whether you are a payer in search of a solution for simplifying the W-9 process, or a payee looking for an easy option for sharing an accurate W-9 – choose an electronic option.
IRS research shows that paper forms generally contain errors that go unnoticed. However, when you fill out a form digitally you are more likely to catch these errors, like a transposed letter or number. This also makes it easier to request and share W-9 forms, as it eliminates manual processes like mailing and faxing.
Some e-file providers offer a W-9 solution as well, just make sure that they are IRS-authorized and have sufficient features and security measures to meet the needs of your business.
One such solution is from TaxBandits, this IRS-authorized e-file provider offers an online Fillable W-9 solution. This is quick and easy, and since they are SOC 2 Certified, they have a high standard of security measures that protect your sensitive information.
After completing the W-9 electronically, it is available for download and/or it can be emailed directly to your payer(s).
Additionally, their W-9 Manager is available for businesses who need a way to request and gather W-9 Forms from their independent contractors as part of an ongoing process.
Final Takeaways
There you have it, we’ve discussed the significance of the W-9 Form and how easy it can be to mistakenly submit an incorrect name or business name. On the flip side, we’ve outlined best practices for double-checking the accuracy of the name and shared tips, such as filling out the form electronically to avoid common errors. With this knowledge, you can now confidently complete any W-9 Form that crosses your path—and, of course, stay vigilant in ensuring the accuracy of the provided name!
Sources:
https://www.irs.gov/forms-pubs/about-form-w-9
https://www.irs.gov/instructions/iw9
https://www.irs.gov/businesses/small-businesses-self-employed/backup-withholding
