A Form W-9 is an IRS form that employers use in order to prepare checks for employees in addition to annual W-2 forms. An independent contractor or an individual who has his own business might be requested by a client to complete a Form W-9 for accurate payment reporting.
While completing a Form W-9, an individual needs to fill in his full legal name and the name of his business if he's operating under another name. Options for tax classification on the form include sole proprietor, partnership, estate and entity. A taxpayer also needs to fill in either his Social Security number on the form, employer identification number or taxpayer identification number if he is a non-resident immigrant who doesn't have a Social Security number.
For independent contractors, if they are paid at least $600 by an individual or business during a full tax year, it is a legal requirement to report those earnings to the IRS by completing a Form 1099-MISC. In order to accurately fill out the 1099-MISC form, businesses use the information provided by the independent contractor when they fill out a Form W-2. Even though businesses and individuals don't withhold taxes from payments sent to independent contractors, the IRS wants to be informed of how much the contractor earned during the tax year.