How to Fill Out a W-9 for Nonprofits and When it’s Necessary
One of the largest administrative expenses nonprofits and for-profits both face is hiring staff members who will carry out the day-to-day needs of the organization. Taking on full-time team members is expensive! That’s why when there are temporary projects (think website design, consulting services, etc.), many nonprofits choose to turn to contractors instead.
In fact, many nonprofits even contract out some of their own services for other organizations. Maybe someone reached out to your organization to be a consultant for another struggling nonprofit and offered to pay you for the service. This could be a great way to earn some additional revenue!
Contracting is therefore a key part of?financial management ?in the nonprofit world.
Unfortunately, contracting comes with some new official government forms, including the W-9. For nonprofits, the W-9 doesn’t have to be a complicated form. However, you should understand when it’s used and how to fill it out correctly. That’s what we’ll cover in this guide. Specifically, we’ll dive into the following points:
Contracting is a great way to earn additional income for your nonprofit or help accomplish something complex at your organization for a short time. By learning more about the W-9, you won’t have to dread tax season even during years when you’re deeply involved with contracting. Let’s dive in to learn more.
What is a W-9 for Nonprofits?
The?Form W-9 ?is the IRS form used as a “request for taxpayer identification number and certification.” When someone contracts work from your organization or you contract work from someone else, this form is used to request necessary tax information from the contractor.
The form requests information like the contractor’s name, tax identification number, address, and more. It’s a short, six-page form, but only the first page requires the contractor to fill in information.
Purpose of Nonprofit W-9 Forms
Let’s say a nonprofit organization requests contracted work from a consultant to help them plan a capital campaign. That contractor will be paid a pretty penny for their services to the nonprofit and they will need to report that income during tax season. Instead of a W-4, the organization would file a?Form 1099 to report the miscellaneous income ?and provide that form to the contractor.
However, the Form 1099 also requires information about the contractor themselves. And if the nonprofit is filing the form, how will they know what to include in that form? The contracting organization will need to request a W-9 from the contractor prior to filling out the 1099.
The purpose of the W-9 is to provide the tax information that contracting organizations need to complete the Form 1099.
While that’s the most relevant and relatable purpose, the W-9 also has a purpose at the federal level. It provides the information that allows the IRS to match up the submitted 1099 forms reported with the tax returns filed by contractors.
When do Nonprofits Worry About the W-9 Form?
As a general rule of thumb, the Form W-9 needs to be filled out when a contractor isn’t an official employee of the contracting organization and that contractor is paid over $600 within a calendar year for their services.
Essentially, there are two reasons you might be reading about the W-9 Form for your nonprofit: Either you need to request one of these forms from a contractor or you need to fill one out because you have contracted your services for another organization.
Requesting a W-9 from Contractors
If you’ve contracted someone to work for your nonprofit, all you need to do is request a W-9 from that contractor (until you file the 1099, of course). They’ll send you back a completed form that you should file strategically and safely.
We recommend that you request the W-9 Form at the beginning of your relationship with the contractor. This saves you from having to track down your contractors and request forms during the already-hectic year’s end.
Once you’ve requested a W-9 from a vendor, you can continue to use the information in that form, even in subsequent years. You’ll only need to request a new W-9 Form if their information changes, for example, if they get a new taxpayer identification number (TIN) or an updated status.
Filling out a W-9 for Contract Work
If your nonprofit is contracted by another organization for consulting services, design services, or other work, the contracting organization will request a W-9 from your nonprofit (ideally at the beginning of the relationship). You’ll fill it out on behalf of your nonprofit and send the nonprofit W-9 form back to the contracting organization.
In the next section, we’ll discuss the information you need and how to fill out the W-9 for nonprofits.
How to fill out a W-9 for Nonprofits: Step by Step
If someone requests a W-9 from your nonprofit, don’t fret! It’s not a very long or difficult form to fill out. You simply need to know some background and technical information about your nonprofit.
When you download it from the IRS, this is what the W-9 Form will look like:
We’ll step through each of the steps and boxes on the Form W-9. Follow these step-by-step instructions for filling out this form:
1. Write your organization’s official name.
When you incorporated or established your nonprofit, you provided an official name on your Form 1023 and your articles of incorporation. Provide this official name on the W-9 form to match up with your other federal and state forms.
2. Write your organization’s unofficial name.
If your organization is generally referred to as a different name than your official name, you’ll want to include this in box two of the nonprofit W-9. However, if you operate under your official name, you can leave this section blank.
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For example, let’s say The Association for Puppy Welfare is commonly shortened to as The Puppy Association, that organization may choose to put their unofficial common name in box two.
3. Name your organization’s federal tax classification.
Box three of the W-9 Form requires the contractor to disclose their federal tax classification. Essentially, you must provide the tax code your organization falls under. The classification options include the following:
If you’re classified as a corporation, you’ll likely check the C Corporation box. S Corporations are slightly different and offer tax benefits for small businesses with fewer than 75 shareholders (only a few small businesses choose this classification). Or, you may instead check “other” and fill in the description box to say “nonprofit corporation.”
If you were filling out this form as an individual (as many of your contractors may do), you would check the “individual/sole proprietor” box.
If you’re unsure of your organization’s specific tax classification, you can always consult a lawyer or tax advisor. Then, make a note of this classification so you’re sure to remember it for future W-9 Forms for your nonprofit.
4. You’ll most likely leave the “exempt payee code” blank, but always double-check.
Box four of the W-9 is for people to indicate whether the payment is subject to backup withholding. Some of the payments that may be subject to backup withholding include:
Chances are, as a nonprofit, you’ll end up leaving this section blank. But always double-check the?IRS guidelines ?to make sure everything is in line.
5. Provide your organization’s mailing address.
Boxes five and six on the W-9 are fairly easy and straightforward. You simply record your organization’s mailing address in these sections.
6. [Optional] You can provide the requestor’s name and address.
Next to the address box, there’s an option to provide the requestor’s name and address so you can make notes of who has access to your sensitive information. This can be helpful for you to keep track of those who have access to your TIN. For individuals, this is also important because you’ll use your social security number on the W-9.
If you fill out W-9s for your nonprofit on a frequent basis, we recommend that you fill out this section of the form and file a copy of the form in a safe location.
7. List optional account numbers.
Box seven on the W-9 for nonprofits is more helpful for the contracting organization. Some contractors use numbered systems in which they refer to various contractors. This box, which requests optional account numbers, allows them to include the number to which they reference your nonprofit as a contractor.
When the contracting organization requests your W-9, they may ask to dedicate a specific number in this “account number” space. If they don’t request this number be added to the space, you can leave the section blank.
8. Fill in your taxpayer identification number.
Finally, one of the most important sections of this form is the space to fill in your taxpayer identification number (TIN). As a registered 501(C)(3) organization, your nonprofit should have an employer identification number (EIN) that you use to identify yourself. This is where you’ll write out this number.
If you don’t yet have an EIN, apply for one before submitting the W-9 for your nonprofit. Then, in box 8, you can write “applied for” in the TIN section of the form. When you do this, you’ll have 60 additional days to provide your EIN to the requesting organization.
When individuals fill out this section, they’ll identify themselves as an individual/sole proprietor (therefore do not have an EIN) and use their social security number to identify themselves in this section.
What are the Next Steps Regarding the Nonprofit W-9?
Before you submit your nonprofit W-9, double and triple check the information you’ve included is correct and complete. If you put the wrong EIN or an incorrect address, you may find tax season to be a nightmare this coming year (or you may never receive your payment!). Once you’ve triple-checked your work, go ahead and send this form back to the requesting organization.
If you were the one to request the W-9 from another contractor, they should send it back to you in a timely manner. Then, you’ll need to use the information on that W-9 to complete the 1099 for the contractor at the end of the year.
Make sure to keep track of your various forms and file them away securely in your?accounting system ?for safekeeping. This will help you maintain an organized system, ensuring TINs and social security numbers don’t end up in the open.
The W-9 isn’t an incredibly challenging form to complete, but it can be tedious if you have to continually re-learn the different elements of the form and look up your EIN and other tax information each time
Keep resources like this guide and file away W-9s that your organization has submitted. This will help make the filing process smoother as you fill out more W-9s in the future.
If you’re looking to learn more about tax forms and accounting for nonprofits, review these additional resources: