What is a W-9 and When Do You Need One?3 min read
Ahh, taxes. Not the most fun subject.
Taxes can be complex but not as hard as you may think. And fortunately, there is a lot of help out there. As a freelancer, you may receive a W9 form from your clients.
What is a W9?
A W9 is a form from the Internal Revenue Service (IRS) requesting a Taxpayer Identification Number and Certification. It is used for freelancers who work as contractors rather than full-time employees.
A business or individual will send you a W9 when they need your social security number in order to notify the IRS of how much they have paid you.
As a freelance contractor, you have more control over when and how you complete projects. But you do not receive the same benefits as a full-time employee such as a 401k contribution match and health insurance. This makes your tax situation different also. As an independent contractor, you can claim more deductions for your work expenses and home office. Your vehicle could even be a possible deduction depending on your work.
Be sure to consult a professional accountant to find out what you can and cannot claim for your business.
“Businesses that hire independent contractors do not withhold income tax or pay Medicare or Social Security taxes for their independent contractors, as they do for their employees. Instead, contractors are responsible for these obligations. However, the IRS still wants to know how much these contractors received to make sure they pay the taxes they owe, and it uses form 1099-MISC to gather this information.” Investopedia
After you have filled out a W9 form you may later receive a 1099 form from the person paying you. While these forms are straightforward to fill out, as a freelancer your clients are likely not withholding tax payments for you so you will need to save money to pay your tax obligations quarterly yourself.
Again, consult a professional if you need help with this. There are accountants who cater to freelancers and understand the ins and outs of self-employment.
To make this whole process easier you will want to stay organized with your invoices. And keep reports so you are prepared for tax time.
You can use And.co to keep your business organized throughout the year. You can store your client contacts, proposals, invoices, time tracking, and more. Then when tax season is upon you, And.co can generate the reports you may need to properly file your taxes.
Keeping track of all your clients in one place is helpful because you can review how much you have been paid by each client. This makes those W9s and 1099s so much less stressful. You will not have to go hunting through emails and documents to find everything you need. You can just focus on running your business.
Do You Need To File?
According to the IRS Self-Employed Individuals Tax Center,
“You have to file an income tax return if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Form 1040 and 1040-SR instructions (PDF).”
The IRS has a virtual workshop about small business taxes that you can watch for free to get a better overview.
Always be careful when someone asks for your tax ID number or social security number.
“An independent contractor who receives an unexpected W-9 should hesitate before filling it out and research whether the requester has a legitimate reason to ask for this form.” Investopedia
Note: The IRS filing deadline had been extended due to COVID-19. You can find the new dates and other updates here Coronavirus Tax Relief.
Stay organized with And.co and get the help you need to breeze through tax season minus the stress while keeping your focus on your business and clients. Happy Freelancing.