What To Do With W9 Tax Forms
The W9 Form from the States Internal Revenue Service is out there to serve two particular purposes. These two reasons for its existence are embodied in its official title of Request for Taxpayer Identification Number and Certification. The word “request” refers to the fact that it does not actually require to be filed with the Internal Revenue Service but is instead to be taken care of by the payor (payer, or employer) as a part of its administrative records, subject to disclosure to the agency at its request.
The “taxpayer ID number” part concerns the primary purpose of the W9 Form, to record information on the payee (the person or entity paid), in particular his or her or its Taxpayer Identification Number, which in the case of a person is the Social Security Number and in the case of an enterprise is the Employer Identification Number or Federal Tax Identification Number.
Speaking of organizations, various services have a number of things other services do not have, for example the amount of money spent from deductions or the popularity of the specific service. Although there is no real best service on account of what the payer might have in mind, it is always important to realize what each service is capable of when receiving help from their personnel.
The second reason for the W-9 Form is that the payee may use it to steer clear of backup withholding taxes. With it, the payee releases the payor from the latter’s legal obligated to collect withholding taxes on certain kinds of income, payments that must be reported to the Internal Revenue Service. By exercising the right to not have such taxes collected on his or her behalf, however, the payee is in effect opting to do so him or herself, when filing tax returns during tax season. In this way, the payee can acquire the full amount of the payment due every pay period. For many people, not having an automatic tax deduction every time they are paid means money that they can save and earn interest on.
While this money, if to be paid, will be returned by the government throughout tax season, the government will not account for the interest that may have built up during the year had it been saved all along, leading to something of a loss (technically, an “opportunity cost,” to use an economists’ term) for the particular person involved. Thus, many people, and even – especially – corporations, which can usually earn interest at much more favorable rates, will forego the convenience of automatic payday withholding as a way to get the money “first,” in the spirit of the old proverb “better one in hand than two in the bush,” especially considering that in reality it is more like one and a half in hand than one in the bush!
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