As a startup founder, you have a lot on your plate, including managing finance and tax details for your business and your employees/contractors. One important document is the IRS W-9 form. Here’s what you need to know about W-9s, including their significance to your business and how to handle them effectively.

What is a W9 form?

A W9 form is an IRS document used to gather information about independent contractors or freelancers engaged by your business. The form asks for important details including the contractor's name, address, and taxpayer identification number, usually their Social Security number or Employer Identification Number. The form also requires verification that the provided information is accurate.

Why is a W9 form important for your business?

Collecting W9 forms from your independent contractors is important in order to:

  • Report taxes — The details on the W9 form are instrumental in reporting payments made to your contractors to the IRS. This ensures both you and your contractors can accurately report income and pay appropriate taxes.
  • Avoid penalties — Neglecting to collect W9 forms from your contractors can incur penalties from the IRS.

W9 deadlines and collection process

You should get a completed W9 form from your contractor before paying them for the first time. Even though the IRS does not explicitly mention a deadline for this collection, it is good practice to do this at the onset to avoid scrambling during tax season.

There are several ways to collect W9 forms:

  • Digitally — Using online platforms or using accounting software that offer electronic W9 submissions ensures ease and security
  • Over email — Personalized email requests accompanied by clear instructions for completing the form are advisable
  • In person — W9 forms may also be collected in person during onboarding sessions or meetings

Once received, you should keep the contractor’s W9 form for at least four years to ensure documentation is accessible during tax filing. If you are using the same contractor from year to year, be sure to periodically review and update your W9 forms to make sure their information (eg. their address) is still up to date.

Taking care of financial paperwork like W9 forms can be tedious; that's where professional assistance can make a huge difference. If you want to focus on growing your business, while ensuring that your tax obligations are handled efficiently, consider the expertise Digits — accounting built for startups.