When is a W-9 is needed?
Generally, you may be asked to supply an executed W-9 form when you earn any type of non-employment income. Examples include:
- Prize money from contests or sporting events
- Gambling winnings
- Freelance or independent contractor earnings
- Interest or dividends
- Rental income
- Cancellation of debts that the IRS considers income
Technically, payers in these situations aren't required to file 1099s unless the income in the tax year exceeds $600. However, payers often ask for a W-9 before making any payments, particularly for independent contractors, so they have the form on hand just in case the income eventually totals more than $600.
Non-income scenarios that require a W-9 include the funding of a mortgage loan and the opening of an individual retirement account (IRA). Mortgage interest paid and IRA contributions are reported to the IRS using the taxpayer information you provide on the W-9.
Form W-9 versus Form W-4
Form W-9 is used for non-employment income only. In employment scenarios, the payer/employer will require a Form W-4 instead. There is some overlap in the information required by the two forms. However, the W-9 and W-4 have different purposes.
The W-9 facilitates the creation of 1099 and other types of income reporting. The W-4 defines the federal tax withholding required for an employee's pay. The W-4 also documents the employee's SSN used for reporting the income to the IRS.
