W-9 is a tax form (also known as Request for Taxpayer Identification Number) that businesses use for collecting the tax identification and contact information of a payee who is an independent contractor. Companies use the information on a W-9 to generate a 1099-MISC, a tax form required by the Internal Revenue Service (IRS) for reporting miscellaneous payments made to an independent contractor that total more than $600. A W-9 form does not require a payee to indicate tax withholding because the liability of submitting self-employment taxes relies on the independent contractor.

A W-9 tax form contains the following information:

  • Contractor name
  • Business name (if it’s different from the contractor’s name)
  • Type of business entity, such as a sole proprietor
  • Address of the contractor
  • Taxpayer identification number, which is either the social security number or employer identification number
  • Signature and date

Best Practices

Some companies put the responsibility on the payee to locate, complete and submit a W-9 form. This intake process can make the remittance workflow inefficient, putting at risk not only the accuracy of extracting data but also the timing for issuing payments.

Since a W-9 form is a business record—it’s not submitted to the IRS—accounts payable should make collecting and validating a W-9 form efficient and accurate. Here are a handful of best practices that make the intake of W-9 forms a seamless part of the accounts payable workflow:

  • Implement a self-service program that enables payees to input tax information directly and securely into the accounts payable system, thus eliminating the requirement that payees must locate and submit a W-9 form on their own.
  • Speed up the verification of tax identification number (TIN) with automation tools. Before issuing a remittance, payers should verify that the payee has submitted a valid TIN (a social security number or employee tax ID). If the TIN is not verifiable, the payer is required to apply backup withholding, which is reserving 28 percent of the payee remittance for taxes. Automation tools can quickly verify the validity of a TIN or apply backup withholding if necessary.
  • Convert manual, time-consuming tasks into automated processes. Collecting payee information for a W-9 requires often requires constant follow up. Automation software removes this manual effort. For example, automation tools can detect missing or incomplete W-9 forms and send alerts to payees.

Data Points

Source: The W-9 Requirement

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