Form W-9 for Non-Profit Organizations - An overview
The IRS provides nonprofit organizations with a tax exemption, making them exempt from paying federal income taxes. This means they don't have to deal with many tax forms, unlike other business organizations.
Form 990 is one form that nonprofits will file annually to report their finances, activities, and much more to the IRS. In addition to that, nonprofits might have to deal with one another form more often, that is, W-9. Though it isn't a tax form, the W-9 may play a vital role in ensuring compliance for nonprofits.
Read through this article to understand everything the nonprofits should know about Form W-9.
Table of Contents:
What is a Nonprofit Organization?
Nonprofit organizations must comply with IRS regulations, including filing 1099 forms for payments made to independent contractors and non-employees. Despite their tax-exempt status, these filings ensure transparency and accountability in financial transactions.
Request W-9:
- If your nonprofit has hired any individuals or entities on a contractual basis to perform any specific activities, you’ll need to obtain Form W-9 from them for reporting the payouts you make.
- For example, let’s say, your nonprofit has planned to construct a free-to-use swimming pool for sports professionals and has hired independent contractors for construction works.
- In this case, you must obtain a W-9 from each of these contractors. You can then use the information they provide on W-9 to file 1099-NEC for them, if applicable.
Fill W-9:
- In certain instances, your nonprofit organization may have to fill out and submit a W-9 to other businesses or individuals (payers).
- Let’s say your organization is a 501(c)(3) hospital and has provided paid consulting services for a third-party business. In this case, the respective business will request you to furnish a W-9 Form so that they can file a 1099 for you at the year-end.
Note: If you are a payee, you can directly complete and share your W9s with your payers. Click here to learn more information about Fillable W-9.
Form W-9 - An Overview
Form W-9 is used by businesses and entities to request the Tax Identification Number (TIN) of contractors for tax reporting. While not filed with the IRS, it ensures accurate information for completing forms like 1099-MISC.
Businesses must issue Form W-9 if they pay contractors over $600 annually. Along with the TIN, it also collects backup withholding status, though most contractors manage their own taxes.
For nonprofits, W-9 forms are crucial in specific cases, despite their tax-exempt status. Nonprofits already file Form 990 annually to report their finances and activities, but W-9s are essential for ensuring compliance in transactions with contractors or vendors.
When Does My Nonprofit Need to Use Form W-9?
Form W-9 is needed in two main situations for nonprofits:
-
Hiring Contractors or Vendors
If your nonprofit hires a contractor or vendor and pays them over $600, you must request W-9 to gather their Tax Identification Number (TIN) and address for Form 1099 reporting. Periodically verify their details and request a new W-9 if any information changes.
-
Acting as a Contractor for Another Organization
If your nonprofit serves as a contractor for another organization, they will request a W-9 from you. Complete and return it promptly to ensure the hiring organization can report the transaction properly.
How to Fill Out a W-9 for Nonprofits?
If your nonprofit organization is required to fill out Form W-9, follow these steps:
- Line 1: Enter the full, legally registered name of your nonprofit organization.
- Line 2: Leave blank or enter the "Doing Business As" (DBA) name, if applicable.
-
Line 3: Check the "Other" box, and then specify the classification as “Nonprofit Corporation Exempt Under IRC Section ___.”
- Fill in the blank with the applicable IRS section number, such as 501(c)(3), which indicates your tax-exempt status.
-
Line 4: If your nonprofit is exempt from Backup Withholding and FATCA Reporting, you must enter the applicable codes:
- Exempt Payee Code: Enter "1" (for nonprofits exempt under section 501(a)).
- Exemption from FATCA Reporting: Enter "A" (if exempt from FATCA reporting).
- Line 5 & 6: Provide the complete address of your nonprofit organization, including street address, city, state, and ZIP code.
- Line 7: If applicable, enter your account number. This is typically not needed for most nonprofits unless requested by the payer.
- Enter your Employer Identification Number (EIN), which serves as your nonprofit’s TIN
What Happens if My Nonprofit Fails to Provide W-9?
-
If your nonprofit fails to provide a W-9 or provides an incorrect TIN to your payers, they can withhold 24% of taxes from the payments they make you.
-
To avoid this, you must provide the EIN of your nonprofit promptly to the payers who paid you.
Fill Out a W-9 for Your Nonprofit Easily with TaxBandits!
Use our fillable W9 solution to complete, e-sign, and download or share the W-9 Form of your nonprofit in minutes!
Also, if you are required to collect W-9s from the contractors hired by your nonprofit, you can use our Form W-9 Manager to request W-9 online and manage them securely in one place.
