W-9 vs. W-4: What’s the Difference & Which Form Do You Need?

Comparison between Form W-9 vs. W-4 often causes confusion, as both are IRS tax forms that have similar names but serve different purposes. Form W-9 is used by independent contractors who need to provide clients with their tax information to be paid, while Form W-4 is used by employees to determine their tax withholdings.

This article goes in-depth into both forms to explain their purpose and analyze the differences. We’ll also teach you how to fill them out accurately and which mistakes to avoid while doing so. Lastly, we’ll compare Form W-9 and Form W-4 with other common documents, like Form W-2 and Form 1099.

Key Takeaways

• Form W-9 is used by independent contractors and businesses that perform services to give clients the taxpayer information needed to send and report payments.
• Form W-4 is used by employees to give their new employers the information needed to withhold the right amount of federal tax from their paycheck.
• When filling out the forms, carefully follow the provided instructions, and don’t forget to update the forms after relevant life events (e.g., getting married or having a child).
• Some of the biggest mistakes you can make when filing W-4 and W-9 include using the wrong form in the first place, adding incorrect taxpayer ID, miscalculating withholding, and not updating the forms when needed.

What Is a W-9 Form, and What’s Its Purpose?

Form W-9 is the Request for Taxpayer Identification Number and Certification, and it’s an IRS form typically used for contractual work.

The primary purpose of this tax form is to give clients the information they need to report payments made for the work performed. Since contractors aren’t W-2 workers, employers don’t withhold taxes from their paychecks or report payments made via Form W-4.

Instead, Form W-9 is used to assist in reporting payments made to contractors. This allows both clients and contractors to accurately file their year-end tax forms with the IRS.

Form W-9 contains the following core details about the contractor:

• Name of entity or individual and their business name.
• Federal tax classification (e.g., sole proprietor, C corporation, S corporation, etc.).
• Address.
• Taxpayer identification number (TIN), which is either a social security number (SSN) or an employer identification number (EIN).
• Certification, which is a signature under penalty of perjury confirming that the provided information is accurate.

When You Should Use a W-9

You should use a W-9 if you’re a freelancer or an independent contractor, as well as if you own a business that does contractual work for companies. These professionals and entities fill out Form W-9 to provide their tax information to the client, as long as they received more than $600 in payments from them throughout the year.

Based on the details in the Form W-9 they receive, clients then complete Form 1099-NEC or Form 1099-MISC. One copy is used to report the transaction to the IRS, while the other is sent to the client along with the payment.

Some businesses will also request Form W-9 for other payments and transactions related to real estate, dividends, interests, prizes, and similar.

Additionally, this form is not only used by independent contractors and self-employed individuals, as corporations and LLCs may be asked to complete it, depending on the type of payment and reporting requirements.

What Is a W-4 Form, and What’s Its Purpose?

Form W-4 is the Employee’s Withholding Certificate. It’s another IRS tax form, but unlike Form W-9, this one is used by employees and given to their employers.

This form is essential, and every employee must fill it out and give it to their employers every time they get a new job. The purpose is to disclose the information companies need to determine how much tax to withhold from the employees’ paychecks.

Since taxes are on the pay-as-you-go system, employers need to take the correct amount out of payments to their employees and regularly remit it to the IRS.

Form W-4 enables that by providing information such as:

• Filing status, to indicate whether a taxpayer is filing as Single, Married Filing Jointly, or Head of Household.
• The number of dependents, which can reduce the amount of tax withheld.
• Other adjustments, such as additional non-wage income or requests for extra withholding to reduce tax bills at the end of the year, or to qualify for a tax refund.

It’s important to note that the IRS made changes to Form W-4 in 2020 to remove allowances. The goal was to improve accuracy and move toward data-driven calculations.

When You Should Use a W-4

You should always use a Form W-4 when you start a new job as a regular employee.

However, there are additional instances in which you should submit a new one or update an existing Form W-4, such as when you:

• Change your marital status
• Have a child or claim a new dependent
• Want to adjust your tax withholding

W-9 vs. W-4: Key Differences

W-4 vs. W-9 differences stem from the relationship between the parties (payer and payee) involved.

• Form W-4 is used to exchange information between an employee (payee) and their employer (payer).
• Form W-9 is used to exchange information between a service provider (payee) and their client (payer).

As a result, W-4 establishes an employer-employee relationship, where the employer, as a payer, is responsible for withholding tax and remitting it to the IRS.

On the other hand, a W-9 is used in business-business or business-contractor relationships, where the client is the payer. In this case, there’s no employer tax withholding, and the payee is responsible for their own self-employment tax.

Besides that, Form W-9 is strictly an information-sharing document, while Form W-4 gives you a degree of freedom and allows you to fine-tune your taxes.

Here is the summary of key differences when comparing these employee vs. contractor tax forms:

How to Fill Out a W-9 Form

To fill out a Form W-9, you need to follow the instructions on it, as it is a straightforward process. However, it’s essential to be meticulous, as accuracy is paramount.

Here’s a step-by-step guide on how to fill out a W-9 properly:

• Step 1: Input your name in box 1. This needs to be your legal name that appears on your tax return. If you’re a sole proprietor, you’ll enter your personal name. If you also have a business name different from your individual name, you need to include it in box 2.
• Step 2: Check the box for federal tax classification in box 3a. You need to select only one out of seven boxes to classify as an individual or sole proprietor, C corporation, S corporation, partnership, trust or estate, LLC, or other. Depending on what you selected and to whom you’re giving this form, you may need to check box 3b, as well.
• Step 3: Add your address to box 5; city, state, and ZIP code to box 6. This is where you’ll receive your Form 1099 from the client.
• Step 4: Enter your taxpayer identification number (TIN). This can be your Social Security number (SSN) or employer identification number (EIN).
• Step 5: Certification. Sign and date the form under the penalty of perjury to testify that the information you provided is correct.

Note that box 4 is for exemptions, and that the codes only apply to certain entities and accounts maintained outside the United States. As a result, you likely won’t have to do anything with this section of your Form W-9.

How to Fill Out a W-4 Form

Filling out a Form W-4 requires the same attention to detail and precision as with Form W-9. The document provides detailed instructions on what information to include.

Here’s a concise guide on how to fill out a W-4:

• Step 1: Enter personal information. This includes your first, middle, and last name, address, city, state, ZIP code, and filing status. You also need to include your social security number.
• Step 2: Multiple jobs or spouse works. Fill out this part of the form if you have multiple jobs or if your spouse works and your tax filing status is married filing jointly. To help with this step, the IRS provides a tax withholding estimator.
• Step 3: Claim dependents or credits. This part requires calculating different amounts, based on how many children under 17 and how many other dependents you have. You’ll find the exact figures needed for calculations in the form, as they can be subject to change each year.
• Step 4: Other adjustments. This step allows you to choose to have tax withheld from non-employment income that won’t have withholding, to determine the amount of deductions you may claim, or to voluntarily opt for extra withholding.
• Step 5: Certification. Sign and date the form under the penalty of perjury to testify that the information you provided is correct.

Keep in mind that Steps 2, 3, and 4 aren’t always mandatory, and you can leave them blank if they don’t apply to you.

W-9 vs. W-4 vs. W-2 vs. 1099 Forms

Forms W-9, W-4, W-2, and 1099 all serve different purposes but connect in multiple ways.

For starters, Forms W-4 and W-9 can be viewed as input documents used to provide information at the start of work. Conversely, Forms W-2 and 1099 are output documents sent by employers and clients to summarize what’s been paid throughout the fiscal year.

Moreover, Forms W-2 and W-4 are related to standard employment. Employees fill out and give their employers Form W-4 to determine tax withholding. On the other hand, employers fill out and send Form W-2, Wage and Tax Statement, to their employees to report wages paid and taxes withheld.

Forms W-9 and 1099 are typically related to contractual work. Independent contractors and businesses that provide services use Form W-9 to provide tax identification information to their clients. Clients use Form 1099 to report payments to vendors and contractors.

The biggest differences are when comparing Forms W-2 vs. W-9 and Forms W-4 and 1099, since they share the fewest common characteristics and are rarely used together.

4 Common Mistakes to Avoid When Filing W-4 and W-9 Forms

While filling out and sending Forms W-9 and W-4 is rather straightforward, there are some mistakes you can make if you aren’t careful. Here are the biggest and most common ones:

1. Incorrect taxpayer ID. An identification number (either an SSN or an EIN) is a string of digits, and it’s easy to make a mistake when adding them to a tax form. If you make this mistake with your Form W-9, you may trigger backup withholding, making the payer legally required to withhold 24% of the payment and send it to the IRS.
2. Miscalculating withholding on Form W-4. Incorrectly calculating how much your employer needs to withhold from your paycheck (e.g., by failing to account for a second job or a spouse’s income) can result in under-withholding. Because of that, you’ll likely have an unexpectedly large tax bill at the end of the year.
3. Using the wrong form. Form W-9 is used by 1099 contractors, while Form W-4 is used by employees. If a contractor submits a W-4 or an employee submits a W-9, this will lead to a compliance error that can take time and resources to rectify.
4. Not updating the forms. Changes to your life and professional circumstances may require you to update the information on your Form W-4 or W-9. Failing to do so can result in underpayment and penalties.

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Final Thoughts

The simplest way to remember the difference between Form W-9 and W-4 is to see them as employee vs. contractor tax forms. W-9 is used by contractors to give clients information needed to pay them, while W-4 is used by new employees to give employers information needed to withhold taxes from their paychecks.

Misunderstanding these forms and using them incorrectly can lead to issues with payments, under-withholding, unexpectedly big tax bills, and more. That’s why it’s essential to fill out the forms carefully, double-check everything before sending them to recipients, and update them when the information needs to be changed.

Lastly, don’t forget to use our document generators if you need help creating more complex forms, like W-2 and 1099.

W-9 vs. W-4 FAQs

#1. Do employees ever fill out a W-9?

No, employees do not fill out a W-9. This form is mostly used by independent contractors. If your employer asks you to fill out a Form W-9, this may indicate that you’ve been misclassified and you have an incorrect employment status.

#2. Can a contractor fill out a W-4?

No, a contractor should not fill out a Form W-4. Since this form is filled out by employees, that would indicate that a contractor is employed. This would mean that the employer has to withhold taxes from their payments, yet contractors are independent and responsible for self-employment taxes.

#3. Does a W-9 mean I’m self-employed?

A Form W-9 usually means that you’re self-employed, but not necessarily. While independent contractors often use Form W-9 to receive payments from clients, this form can also be used in situations like when receiving interest, dividend payments, or proceeds from real estate transactions.

#4. Is a W-4 only for federal taxes?

Yes, Form W-4 is only used for federal taxes. The form is filled out by an employee and given to their employer to determine the correct amount of federal income tax that needs to be withheld from the worker’s paycheck. States may have similar forms for state taxes.

#5. Do W-9 and W-4 affect pay stubs?

Form W-4 directly affects pay stubs, while Form W-9 typically doesn’t. Since Form W-4 is used to determine federal income tax withholding, it will influence how much will be withheld from an employee’s gross wage and what their net pay will be.