What is a W-9 and Why is it Important?

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Keeping your taxes in order is vital for any nonprofit. Unfortunately, it can get complicated and confusing when it comes to employees, especially if you’re hiring both traditional staff and regular contractors or freelancers.

The W-9 is among the most crucial forms to help keep everything straight, but many don’t know much about it or when it’s used.

Let’s take a closer look at the document and why it’s so important for nonprofits.

What is a W-9 Form?

A W-9 form (officially titled “Request for Taxpayer Identification Number and Certification”) is a simple, standardized federal form that allows employers to collect the necessary tax and personal information from those who work for them.

The titular Taxpayer Identification Number is the most critical element of the form. In most cases, this will be an employee’s social security number, but it can also be a business’s EIN or less common identifiers like Individual Taxpayer Identification Number (ITIN) and Preparer Taxpayer Identification Number (PTIN).

The payee also certifies that they’re not subject to any backup withholding, which would typically only be the case if they failed to provide information to previous employers or were caught underreporting income by the IRS.

In addition, the W-9 requires details like the type of entity (individual, C corporation, S corporation, etc.) and an official address.

Why is the W-9 Form Important for Nonprofits?

Anyone who’s helped lead a nonprofit knows that keeping the organization’s tax-exempt status is the most critical factor to its survival. A crucial part of that is abiding by tax reporting and compliance requirements. This includes filing the appropriate tax forms with the feds, which, for contractors or freelancers, would be a 1099-NEC or 1099-MISC.

The W-9 is designed to collect the information necessary to fulfill these requirements. Aside from legal requirements, diligently collecting W-9 information from contractors or vendors shows a commitment to transparency and fully documenting its work. Insisting on complete W-9s can also help avoid doing business with potentially unsavory partners who may not want to complete one for various reasons.

No matter which reason applies most to your organization, they all show why getting this form completed should be a priority when working with contractors, freelancers, and vendors.

When Would a Nonprofit Need a W-9 Form?

There are three primary situations where an organization should typically get a W-9 completed by outside parties.

The first, as we’ve mentioned, involves paying independent contractors and consultants. While 1099s must be issued to any person or business that receives more than $600 from your organization during the year, it’s good practice to require completed W-9s from every payee to avoid the need to track down the information later.

In addition, W-9s are required for any vendors or companies that are engaged for outside services. On the flip side, your organization may occasionally need to fill out a W-9 itself. This generally happens if you’re contracted out by another organization to do some sort of limited work on their behalf. Large donors or grant givers may also request your organization fill out a W-9 to confirm relevant tax details.

Tips for Completing the W-9 Form

Tax forms can always feel a bit intimidating, but the W-9 is quite simple to fill out.

First, identify who’s requesting the form and ensure it’s necessary.
Then, collect your own information, like your organization’s TIN/EIN and official business name. Before you start, double-check to make sure you have the correct and most up-to-date version of the W-9 as well.
Then, simply provide the information where indicated, including any exemptions if they’re applicable.
Finally, complete the form by signing and dating it before returning it to the individual or organization requesting it. As with all pertinent tax records, you should keep a record and copy for yourself as well, just in case.

Reach Out to The Charity CFO for Help with the W-9

The W-9 is one of the most crucial tax forms to understand, whether your organization is soliciting them from freelancers and contractors or filling them out itself. But it’s relatively simple once you’ve looked over the particulars.

While it might just seem like extra paperwork, it ensures all parties have the tax information they need to meet their reporting requirements.

Still, amid all the other tasks and requirements of running a nonprofit, it’s easy to allow things like prompt W-9 collecting, completing, and processing to fall through the cracks or end up delayed by everyday issues. That’s where The Charity CFO comes in. Our experienced team can help you stay diligent about your tax reporting and filing requirements, from W-9s to the many other tax forms and deadlines that always seem to be looming.

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