Our customer support is available 24/7:
W9 Or W4: What Is The Difference?
When it comes to taxes, it can be tiring. This can be especially true when you have forms with similar names and don't know their differences. Two of the most common examples are the W-9 and W-4. These two forms are quite different.
It's important to know how to identify every tax form, whether it's W9 or W4. Each of them has its use and is usually filled differently. Filling them out incorrectly can lead to penalties, issues, or delays in your pay when it's tax time.
We'll break down what each form is used for, why it matters, and who needs to fill it out. You'll know the differences between a W-9 and a W-4 by the end of this article.
What Is Form W-4?
The Form W-4 is officially called the Employee's Withholding Certificate. It is one of the most important documents you'll complete when starting a new job in the U.S. This form helps your employer know how much federal income tax should be taken out of your paycheck. Without it, your employer wouldn't know how to withhold the right amount of tax for you.
So, when you begin a new job, you'll typically have to fill out a W-4. Also, you may need to update this form if you have any changes in your personal or financial situation. Let's say you get married, have a child, or take on a second job. This ensures your tax withholding stays accurate throughout the year.
The form asks for key details, such as your:
Full legal name
Social Security number (SSN)
Marital or filing status
Number of dependents
Whether you want any extra withholding
These details directly affect how much money is taken out of each paycheck. If your W-4 is outdated or filled out incorrectly, you might end up having too little tax withheld. This is not good, as you might get a surprise bill when it's time to file your taxes. On the flip side, if too much of your income is withheld, you'll receive a bigger refund. However, it is the cost of you having smaller paychecks throughout the year.
Therefore, your W-4 ensures that your employer gets your taxes right from the start.
What Is Form W-9?
The Form W-9 is called the Request for Taxpayer Identification Number and Certification. It is commonly used by people who work for themselves rather than as regular employees. Therefore, this form is meant for independent contractors, freelancers, vendors, and other self-employed individuals.
The main purpose of the W-9 is to give your Taxpayer Identification Number (TIN). It gives your Social Security Number (SSN) or Employer Identification Number (EIN) to the company paying you. This allows the business to accurately report the payments they make to you when it's time to file your taxes.
The W-9 gathers important information. This includes your legal or business name, address, or tax classification, such as sole proprietor, LLC, or corporation. It also includes your TIN, your signature, and certification.
Unlike the W-4, you don't need to send your W-9 to the IRS. Instead, the company hiring you keeps it in their records. Then, at the end of the year, they use that information to prepare the appropriate form. It is usually a 1099-NEC or 1099-MISC, only if they've paid you more than $600.
This process ensures that the IRS is aware of the income you've earned. This means that you'll have to pay your taxes yourself as the contractor.
To make it easier to understand: Let's say you're a freelance graphic designer working with five clients. Each client will likely request your W-9. This is so they can properly report how much they've paid you. When the tax season comes, each of those clients will issue 1099 forms. You'll use them to file your taxes.
Is W9 or W4 Better? Key Differences
If you're wondering about what's better, w4 or w9, both of them are actually different. They're both tax forms connected to your income and who uses them. They're also different in terms of how they're submitted and their impact on taxes as well.
The W-4 is for employees, while the W-9 is for independent contractors, freelancers, and non-employees. Your W9 doesn't affect how or when you're paid. It simply gives your taxpayer information to the business that hires you.
There's also a major difference in terms of how they're submitted. You'll give your W-4 to your employer, which goes straight into your payroll calculations. Therefore, it directly affects the amount you take home each pay period. A W-9 is given to your client or hiring business, which they keep on file to prepare a 1099 form at the end of the year.
How they affect your taxes also makes them different. With a W-4, taxes are withheld automatically from your paycheck. This means that your tax responsibility is spread out across the year. With a W-9, no taxes are usually withheld. So, you're paid in full, and it's up to you to set money aside and handle your quarterly or year-end tax payments.
Tax Implications of W-4 and W-9
Understanding the tax implications of these forms is important. This is because U.S. tax law treats employees and independent contractors very differently.
W-4 Employees
When you fill out a W-4, your employer takes care of withholding. This means each paycheck has deductions for:
Federal income tax
Social Security
Medicare
These withholdings usually reduce your tax bill throughout the year. This way, you don't have to worry about setting aside money alone. At the end of the year, you'll receive a Form W-2.
W-9 Contractors
With a W-9, things work differently. No taxes are withheld when you're paid. Instead, you are fully responsible for:
Self-employment tax: This covers both the employer and employee portions of Social Security and Medicare.
Estimated quarterly tax payments: Which you send directly to the IRS to avoid falling behind.
Risks of Non-Compliance
For employees, submitting an incorrect W-4 can lead to over- or under-withholding.
For contractors, if you don't provide a W-9 or underpay taxes, you will be subject to penalties. It can lead to IRS penalties, interest charges, or backup withholding at a rate of 28%. So, the business paying you must withhold part of your income until the issue is resolved.
How To Fill Out Your W9 or W4 Correctly
Here's how you can fill out the W4 or W9; this makes them much easier to handle:
Filling Out Form W-4 (Employee's Withholding Certificate)
Personal Information: Enter your full name, Social Security Number (SSN), address, and filing status (single, married, or head of household).
Multiple Jobs or Spouse Works: Indicate if you have more than one job or if your spouse is also employed. This helps ensure accurate withholding.
Dependents: List your qualifying dependents. It reduces the amount of tax withheld.
Other Adjustments: Add the extra withholding if you expect to owe more tax. You can also note any additional income not covered by withholding.
Signature: Sign and date to validate the form.
You can always use the IRS withholding calculator when needed. Also, remember to update your W-4 whenever you experience life changes. It can be marriage, divorce, or having a child.
Filling Out Form W-9 (Request for Taxpayer Identification Number and Certification)
Name: Enter your legal name exactly as it appears on your tax return.
Business Entity: Check the box that describes your classification. If you're an individual/sole proprietor, LLC, corporation, etc.
Address: Provide your mailing address. It is where your tax documents should be sent.
Taxpayer Identification Number (TIN): Add this. It is usually your SSN if you're an individual. It may also be an Employer Identification Number (EIN) if you run a business.
Certification and Signature: Sign and add the date. It confirms the accuracy of the information.
Make sure you always share the form securely. Also, update it if your business structure, name, or TIN changes.
Bottom Line
If you're there thinking, "What's better W4 or W9?", know that both forms are important. They also perform different functions regarding your taxes and overall financial health. The W-4 is designed for employees. On the other hand, the W-9 is used by independent contractors or freelancers. Make sure you know which form applies to you. Employees and contractors should keep their W-4 and W-9 forms accurate and current. This helps to keep your finances running smoothly.
As an employee or a contractor managing your income, you must keep your records accurate. That's where we come in with our Paystub Creator. Our site creates pay stubs that help you stay organized. This way, you'll be able to track your earnings and be prepared when it's time to file. Let's help you create your simple and reliable documents today!
