Form W-9 Changes for the 2024 Tax Season
The IRS has introduced two useful updates to the 2024 W-9 form. It split the original Line 3 into Line 3a and Line 3b for added clarity. These changes simplify reporting tax classifications and foreign ownership, making it easier for you to fill out the form accurately and with confidence.
Modified Line 3a: Clarification for Disregarded Entities
Line 3a is specifically designed for LLCs to indicate whether they’re classified as a C-corporation, S-corporation, or partnership for tax purposes. If the LLC does not fall into one of these categories, it’s a disregarded entity. In this case, the entity must select its owner’s tax classification.
New Line 3b: Reporting for Flow-Through Entities
The IRS added Line 3b to make sure flow-through entities report whether they have foreign beneficiaries, owners, or partners when giving Form W-9 to another flow-through entity they own.
What Is a Flow-Through Entity?
A flow-through entity is a business where the tax obligations pass to the owners instead of the entity itself.
The new Line 3b ensures that these entities properly report the status of their indirect beneficiaries, owners, and partners. This is particularly important for entities needing to comply with additional reporting requirements, such as completing Schedules K-2 and K-3 for partnerships with foreign partners.
Who Receives Form W-9?
As a business, you may need to request Form W-9 (Request for Taxpayer Identification Number and Certification) from:
- Independent Contractors/Freelancers: To report payments of $600 or more made to them on Form 1099-NEC.
- Vendors/Service Providers: To gather tax information needed to complete Form 1099-NEC.
- Landlords: To report payments of $600 or more on Form 1099-MISC (if you’re renting office space).
- Shareholders: To report dividend payments on Form 1099-DIV.
How Do Employees Provide Tax Information?
Employees provide their tax information via Form W-4 instead of Form W-9.
What Does Form W-9 for 2024 Include?
Form W-9 for 2024 is a simple one-page document. It has a top section with fields that allow taxpayers to list their:
- name or the name of their entity
- business name or disregarded entity name (if different from their name or entity name)
- tax classification
- address
Below that are Parts I and II. In Part I, the recipient lists their taxpayer identification number (TIN) or employer identification number (EIN).
Part II requests the taxpayer to certify the validity of the form’s contents with a dated signature.
How to Fill Out Form W-9 as a Payee
If a business payer asks you to complete a W-9 form as someone who receives non-employee payments in 2024, it’s important to understand how to fill it out so you can ensure the information is accurate and up-to-date.
If a business asks you to fill out a W-9 form as a recipient of non-employee payments in 2024, don’t worry—it’s easier than it might seem. We’ll guide you through the steps to make sure your information is accurate and up-to-date so you can complete the form with confidence.
1. Provide Your Contact Details
The first part of Form W-9 requests your name and current address. Sole proprietors and disregarded entities should list the owner’s name in Line 1 and their business name in Line 2 if the business name differs from Line 1.
In Lines 5 and 6, list your street address, city, state, and ZIP code. The payer will likely use this address to mail any tax information forms at the end of the calendar year, so make sure it’s correct.
2. Choose Your Federal Tax Classification
In Line 3a, check the box that indicates your business entity classification. The choices include sole proprietorship or individual, C-corporation, S-corporation, partnership, trust/estate, and LLC.
Only select LLC if you’ve elected a C-corp, S-corp, or partnership tax classification. If your business is an LLC but doesn’t follow those tax elections, the IRS considers it a disregarded entity. All disregarded entities follow the tax classification of the individual owner.
Line 3b applies to partnerships, trusts/estates, or LLCs that follow a partnership tax classification. If you fall into those tax categories and your business partners with foreign owners or beneficiaries, check the box.
3. Indicate Any Exemptions
If you are exempt from backup withholding or Foreign Account Tax Compliance Act (FATCA) reporting, indicate your exempt payee or reporting code in the appropriate box.
Exempt payee codes will only apply to certain entities, not individuals.
4. Include Optional Information
Form W-9 contains two optional fields. The first optional field lets you provide the business payer’s (the requester’s) name and address.
The second optional field is a space where you can provide an account number that identifies your account with the business payer. While it’s not necessary, it can help the business payer keep track of payments and transactions more accurately.
5. Provide Your Taxpayer Identification Number
In Part I, enter your TIN. It will be your Social Security number (SSN) if you’re an individual or your Employee Identification Number (EIN) if you’re filing as a business.
If you don’t have an SSN and can’t obtain one, you may request an Individual Taxpayer Identification Number (ITIN). You may enter “Applied For” if you are waiting on an SSN, IRS ITIN, or EIN.
6. Read the Certification and Sign
Part II contains a short certification for payees to read. Make sure you agree with all four statements.
Sign the document and indicate the date once you can certify that you:
- provided the correct TIN (or are awaiting the issuance of one)
- aren’t subject to backup withholding (either because you’re exempt or haven’t been notified of non-compliance)
- are a US citizen or US person
- are exempt from FATCA reporting (if you entered a code)
Pay close attention to the special instructions under the certification statement. For example, if you’re subject to backup withholding due to unreported interest or dividends, the IRS requires you to cross out the second item in the certification list.
Do I Always Need to Sign a W-9?
In most cases, yes. However, you don’t need to sign it if the W-9 is for certain transactions like the cancellation of debt. But you will still need to provide an accurate TIN.
W-9 Checklist for Payers
While the payee fills out the W-9, you, as the payer, have an important role to play in ensuring the process is smooth and accurate.
- Determine whether you need to request an individual or other business to complete the 2024 W-9 form.
- Distribute a W-9 form to each payee.
- Receive the completed copies from each payee.
- Review the information provided by the payees for completeness.
- Confirm that the provided TIN matches IRS records.
- Ensure the payee’s exemption from backup withholding or FATCA reporting is correctly recorded.
- Determine if backup withholding applies.
- Use W-9 information to produce 1099 tax forms.
- Keep all W-9s on file for at least four years in case of disputes over payments made or IRS audits.
What Happens After a Payee Fills Out a W-9?
Once the payee fills out a W-9, they submit it back to the payer. The payer reviews the completed form to ensure all relevant information is present. If anything is missing or unclear, the payer should contact the payee for clarification.
The payer then uses the W-9 information to report payments they make to the payee throughout the year. For example, they use this information, along with other documents, to produce and issue 1099 forms.
Penalties for Non-Compliance With W-9 Requirements
Payees must complete Form W-9 and return it to the payer when requested. If they don’t, the payer must withhold taxes from future payments. The current withholding rate is 24%.
If a payee does not have a TIN yet because they’re in the process of applying for an SSN, EIN, or ITIN, they must provide their TIN as soon as possible. Until the payee provides a valid TIN, the business paying them may have to withhold federal taxes from payments to the payee (known as backup withholding).
Backup withholding generally applies to most payments, but exceptions exist for interest, dividends, and certain tradable financial instruments.
Payers may also face penalties. If they don’t file 1099 forms on time because of missing W-9 information that they failed to seek, they may have to pay a penalty ranging from $60 to $330.
Additional Tax Forms for Businesses
Understanding Form W-9 is an important step in managing your taxes. Familiarizing yourself with other key tax forms can help you stay on top of your business finances with confidence. Here are some additional tax forms for businesses that will help you navigate your financial responsibilities smoothly:
- Form 1099-MISC: Reports royalties, rent payments, cash prizes or awards, and other miscellaneous payments to a recipient.
- Form 1099-NEC: Lists total non-employee compensation paid to freelancers, independent contractors, and others.
- Form W-2: Provides an employee’s annual earnings, tax withholdings, and benefit deductions or contributions.
- Form 940: Reports an employer’s Federal Unemployment Tax Act payments for the calendar year.
- I-9 Form: Verifies an employee’s US work authorization.
Legal and Tax Considerations
While Form W-9 for 2024 is fairly straightforward, you may have questions about its use in your business. Because LegalTemplates can’t provide tax or business advice, we recommend consulting a qualified tax advisor or business attorney for company-specific tips. Your advisor can provide personalized guidance for unique situations.
How LegalTemplates Helps
LegalTemplates simplifies the process of managing W-9 forms for both payees and businesses. Payees can quickly fill out their 2024 W-9 forms via our PDF editor. When they’re done, they can send the forms to their business payers. Business payers can store the W-9s in their accounts, allowing them easy access for tax reporting purposes.
Frequently Asked Questions
Does a W-9 Expire?
No. Form W-9 technically doesn’t expire. However, it undergoes intermittent updates by the IRS, so it’s important to use the most current version with any new payees you work with. This way, you will have all the information the IRS requires for accurate tax reporting.
How Often Should a Company Updates Its W-9s?
It’s the payee’s responsibility to update their W-9 information if it changes. However, being proactive can help you identify updates to the recipient’s address, name, or TIN. Consider requesting updated W-9s from payees towards the end of the year to streamline year-end reporting.
