W-9 Form: What It Is and Why It Matters

If you’re working as an independent contractor in the United States or receiving income without being a formal employee, chances are you’ll be asked to fill out the W-9 form. This IRS document plays a key role in the U.S. tax system, and understanding it is essential to operate legally and avoid issues with the Internal Revenue Service (IRS).

What Is the W-9 Form?

The W-9 is an official form from the IRS used to collect tax information from individuals or entities receiving payments in the U.S. without being employed by the payer. In simple terms, it helps the payer report income to the IRS by collecting accurate data from the recipient.

The W-9 form typically includes:

• Full legal name or business name
• Type of entity (individual, LLC, corporation, etc.)
• Tax address
• Taxpayer Identification Number (TIN): can be a Social Security Number (SSN) or Employer Identification Number (EIN)

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Who Needs to Fill Out the W-9?

You must complete this form if you are:

• An independent contractor
• A consultant
• A business partner or supplier who is not an employee
• A foreign company operating or working with U.S. clients (in certain cases)

For example, if you provide services to a U.S. company as an external supplier, they will likely request a W-9 before processing any payments.

What Is the Purpose of the W-9?

The main purpose is to allow the payer to properly report payments made to non-employees. This information is used to:

• Issue the 1099-NEC form at the end of the tax year, detailing income paid to contractors
• Comply with IRS tax reporting requirements

Filling out the W-9 does not mean you will be taxed immediately, but it does allow the IRS to track and verify income between payer and recipient.

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When Should You Submit a W-9?

You should complete the W-9 form:

• Before receiving your first payment from a new U.S. client
• When your tax information changes (name, address, EIN, etc.)
• At the beginning of a business relationship as a vendor or freelancer

What Is a TIN and How Do You Get One?

TIN stands for Taxpayer Identification Number, which can be:

• SSN (Social Security Number): for individuals with legal U.S. residency
• EIN (Employer Identification Number): for businesses or some foreign individuals
• ITIN (Individual Taxpayer Identification Number): for foreign individuals without an SSN who still need to report income in the U.S.

If you’re a Latin American business looking to operate in the U.S., you’ll need an EIN to complete the W-9.

W-9 vs Other IRS Forms

Here’s how the W-9 compares to other related tax forms:

• W-9: For U.S. taxpayers (or entities taxed in the U.S.) receiving payments
• W-8BEN / W-8BEN-E: For foreign individuals or companies that are not U.S. taxpayers but receive U.S.-sourced income
• 1099: Issued by the payer to the IRS and the recipient, reporting the income paid (based on the W-9)

What Happens If You Don’t Complete the W-9?

Failing to provide a completed W-9 can lead to:

• A 24% backup withholding on your payments
• Delays or denial of payments
• IRS audits if income reporting discrepancies are found

Tips for LATAM Companies Working with U.S. Clients

• Get your EIN: If you don’t yet have a U.S. tax ID, Openbiz can help you obtain your EIN efficiently.
• Keep your information up to date: Any changes to your data should be reflected in a new W-9.
• Submit the W-9 promptly: Do this before receiving payments to avoid processing delays.
• Partner with experts: Tax and accounting support is crucial for safe and compliant operations.

Final Thoughts

The W-9 form is more than a formality—it’s a critical step in establishing trust and transparency between businesses and the IRS. Whether you're an individual contractor or a foreign entity working with U.S. clients, understanding and submitting your W-9 properly is essential for avoiding withholding issues and staying compliant.

At Openbiz, we support entrepreneurs and professionals from Latin America in navigating the U.S. business landscape. Whether you need help obtaining your EIN or managing tax documentation like the W-9, we’re here to help you every step of the way.

Need help with your U.S. tax forms or launching your business in the U.S.? Contact Openbiz and let’s make it simple together.

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