W-9 Form and How to Sign Electronically
For small businesses, hiring independent contractors can make more financial and logistical sense than bringing on full-time, permanent employees. It can be a practical choice for short-term or seasonal projects, or when outside expertise and skillsets are needed.
When businesses pay these contractors over $600, they must report that compensation in their yearly tax filings. The W-9 form was created to make this as simple and painless as possible for both the business and its various contractors.
In this article, we’ll explain what a W-9 tax form is, who’s required to complete it, how you can prepare a W-9 with electronic signature, and how Docusign can help make these processes significantly easier.
What is a W-9 Form?
The W-9 form is also known as a Request for Taxpayer Identification Number and Certification form. It is a type of IRS form used by businesses to collect tax information including the person’s name, address, and taxpayer identification number (TIN).
Specifically, businesses typically use the W-9 form to request tax information from temporary employees, such as contractors and freelancers. These employees are not officially listed as full-time employees by the company, but the company has paid them enough that they have to report that payment in their taxes. Full-time, official employees usually won’t need to fill out a W-9 form; they will fill out a W-4 form, or Employee’s Withholding Certificate, instead.
By filling out a W-9 tax form and submitting it to the company you’ve worked for, you are providing that company with the information they need to report how they’ve paid you on their own taxes. They will do this while filling out another tax document, such as a Form 1099.
Who is required to fill out a W-9 tax form?
Business owners must request W-9 forms from contractors, consultants, freelancers, and any other non-employees who received compensations totaling $600 or more during any given year. They will also need to collect a W-9 from sales professionals they’ve paid at least $5,000 within the past year.
Beyond self-employed contractors, W-9s might be required for anyone who has to report income outside the scope of a full-time job. Examples include real estate transactions, mortgage interest, stock sales, canceled debt, and any contributions made to an IRA.
Full-time contractors typically complete a W-4 Form and aren’t required to fill out a W-9.
The W-9 is needed to generate a 1099 during tax season.
What does a W-9 form look like?
The IRS provides an updated example of a W-9 tax form on its website. This pdf should be exactly what your W-9 form looks like and should include every field. Reading the most updated version of the W-9 form is also an excellent way to understand why it exists, how to fill it out, and exactly what you are certifying when you submit yours.
How do I fill out a W-9 tax form?
Step-by-step instructions on how to fill out the W-9 are included on the W-9 itself. The document is one of the more straightforward tax forms to fill out. Contractors will have to include basic information such as their name, business name (if applicable), and address on the W-9, as well as their social security number or taxpayer identification number. They’ll also need to indicate their federal tax classification, including C-corporation, S-corporation, LLC, or individual.
Certain entities have the option to submit claims for tax exemptions. Before submitting the form, it has to be signed and dated to certify its accuracy.
How does a W-9 form with electronic signature work?
As of April 1998’s IRS Announcement 98-27, those who need to can fill out, sign, and submit W-9 forms electronically. The IRS allows payers to send W-9 and W-9S forms electronically as long as:
- The electronic system ensures that the information received by the payer is the same information input by the form filler.
- The information submitted is exactly the information that would be included in the paper form.
- The form includes a W-9 electronic signature by the payee whose name is on the form.
- This W-9 electronic signature identifies the payee submitting the form and authenticates the submission the same way it would identify and authenticate the signee on a paper version of the form.
- The electronic W-9 Form must include a perjury statement.
- The payer must be able to supply the IRS with a hard copy of the W-9 form upon request.
Electronic systems such as Docusign are designed to fulfill each of these requirements so that using them to fill out your W-9 forms is legitimate and legally binding.
There are several advantages to filling out W-9 forms electronically and even signing them with a W-9 electronic signature. The process:
- Saves time: Using the shareable template, employees can fill out the form faster, and HR professionals can upload the templates to their systems more efficiently.
- Reduces errors: Rather than task workers with complicated calculations, the pre-built Docusign template does fast math for you to eliminate errors.
- Makes the signing process easier: Electronic forms also remove any confusion employees might have about what they need to fill out by tagging required fields.
- Protects sensitive information: Docusign’s security measures authenticate the W-9 electronic signature while safeguarding the sensitive information the form discloses.
By digitizing the process, HR professionals can avoid the complexity of obtaining wet signatures and the tedious back-and-forth required when illegible handwriting makes vital data unreadable.
Ready to get started? Existing eSignature customers can access the W-9 template.