Do W-9 Employees Pay Taxes? A Look at Your Obligations
Understand your tax responsibilities as a W-9 independent contractor. Learn about self-employment taxes, estimated payments, and income reporting.
Understanding the W-9 Form
The IRS Form W-9, “Request for Taxpayer Identification Number and Certification,” is used by individuals or entities to provide their taxpayer identification number (TIN) to a payer. This allows the payer to report certain income types to the Internal Revenue Service (IRS) for accurate year-end tax reporting.
Independent contractors, freelancers, vendors, and those receiving interest or dividend payments often complete a W-9. Businesses request this form to obtain the payee’s tax identification number, typically a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN) for individuals.
The primary purpose of collecting a W-9 is to facilitate the payer’s obligation to file information returns with the IRS, such as Form 1099. This information is then used to prepare year-end tax documents that summarize the income paid.
Tax Obligations for W-9 Recipients
Individuals completing a W-9 are independent contractors or self-employed, not traditional employees. Taxes are not withheld from their payments, so they are directly responsible for their own tax obligations, which differ from W-2 employees.
W-9 recipients must pay self-employment tax, covering Social Security and Medicare. For 2025, this rate is 15.3% (12.4% for Social Security, 2.9% for Medicare) on 92.35% of net earnings. This covers both employer and employee portions, unlike traditional employment.
Since taxes are not withheld, W-9 recipients must make estimated tax payments throughout the year. These quarterly payments cover their income tax and self-employment tax liability. If an individual expects to owe at least $1,000 in taxes, they must make these estimated payments to the IRS and potentially to state tax authorities.
Quarterly estimated tax payments are due April 15, June 15, September 15, and January 15 of the following year. Timely payments help avoid underpayment penalties. Taxpayers use Form 1040-ES to calculate and submit these payments.
Reporting Income for W-9 Recipients
Income earned by W-9 recipients is reported to both the individual and the IRS by the payer. Businesses use Form 1099-NEC, Nonemployee Compensation, to report payments of $600 or more made to independent contractors for services performed in a trade or business. This form details the total non-employee compensation received during the calendar year.
Payers must furnish a copy of Form 1099-NEC to the independent contractor by January 31 of the following year. The same deadline applies for filing the form with the IRS.
W-9 recipients use information from their 1099-NEC forms, along with other income and expenses, to report earnings on their personal tax return, Form 1040. This income and related business expenses are detailed on Schedule C, Profit or Loss from Business. Schedule C allows self-employed individuals to calculate their net profit or loss, which then flows to Form 1040.
Contrasting W-2 and W-9 Tax Treatment
Tax treatment for W-2 employees and W-9 independent contractors differs significantly in income reporting and tax handling. Employers withhold income, Social Security, and Medicare taxes from W-2 employee paychecks. These withheld amounts and total wages are reported on Form W-2 annually.
W-9 independent contractors do not have taxes withheld from payments. They receive Form 1099-NEC from clients who paid them $600 or more for services. This places full responsibility for remitting income and self-employment taxes directly on the contractor.
W-9 recipients pay the entire 15.3% self-employment tax, covering both employee and employer portions of Social Security and Medicare. To manage this liability and income tax, independent contractors make quarterly estimated tax payments. This contrasts with W-2 employees, whose tax obligations are managed through regular payroll deductions by their employer.