Businesses that hire independent contractors do not withhold income tax or pay Medicare or Social Security taxes for their independent contractors, as they do for their employees; contractors are responsible for these obligations. However, the IRS still wants to know how much these contractors are being paid to make sure contractors pay the taxes they owe, and it uses form 1099-MISC to gather this information. Businesses do not send form W-9 to the IRS.
Form W-9 asks for the independent contractor’s name; business name (if different); business entity (sole proprietorship, partnership, C corporation, S corporation, trust/estate, limited liability company or “other”; and the business’s tax identification number (or Social Security number, for sole proprietorships that don’t use a separate tax ID number). Form W-9 also asks the person filling it out to certify that he or she is exempt from backup withholding. Most taxpayers are exempt, but if they aren’t, the company hiring the independent contractor will need to withhold income tax from that contractor’s pay at a flat rate of 28% and send it to the IRS.
Since form W-9 requires listing a tax ID or Social Security number, both the person filling it out and the company receiving the completed form must guard the form carefully to protect against identity theft.
Read more: The Purpose Of The W-9 Form | Investopedia http://www.investopedia.com/articles/personal-finance/082714/purpose-w9-form.asp#ixzz4JbOOA0RY