Form W-9 form is a form you receive as an independent contractor when a company hires you. It sets you apart from the company's regular employees who receive Form W-4. Because the employer does not withhold taxes from your paycheck as it does with regular employees, the W-9 form is basic. Falsifying information on Form W-9 may lead to civil and even criminal penalties.
Form W-9
Form W-9 essentially tells the Internal Revenue Service that you are a self-employed. Your employer is not required to deduct payroll taxes from your pay. Instead, you are responsible for sending Medicare and Social Security taxes, including income taxes to the IRS throughout the year. The main parts of the form include your name, business name, federal tax classification, which includes individual or sole proprietorship, C corporation, S corporation, partnership or limited liability company, as well as Social Security or tax ID number.
Civil Penalty
Falsifying information on Form W-9 leads to penalties. If you provide the incorrect tax identification number, the IRS assesses $50 for each failure to provide corrected information. If you make a false statement with no reasonable basis resulting in no tax withholding, the IRS imposes a $500 penalty.
Criminal Penalty
The IRS draws a line between negligence and willfully committing fraud to avoid paying taxes. You are subject to criminal penalties for willfully falsifying certifications or affirmations. This means appearing in court to face criminal prosecution charges. A guilty verdict lands you in jail.
Insight
When filling out Form W-9, ensure that the information you provide exactly matches the information on your tax return. If the information does not match the IRS database, the IRS will notify your employer in writing. Your employer will have you resubmit a new W-9, which already raises red flags with your employer and the IRS.