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How to Calculate Tax on W-9 Income

By Motley Fool Staff – Updated Apr 29, 2025 at 11:38 PM EST

Key Points

Form W-9 collects taxpayer ID for reporting income such as dividends and interest.
W-9 income isn't initially withheld; payees must report and pay taxes themselves.
Backup withholding at 28% applies if issues like under-reporting trigger IRS action.

When you receive compensation other than wages, the payer may ask you to fill out IRS Form W-9 (link opens PDF), which is a request for your taxpayer identification number; for instance, your Social Security Number or Employer Identification Number (EIN).

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A hand using a calculator on a desk filled with paperwork. — Image source: Getty Images.

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This information is necessary when an information return will be required:

Form 1099-INT: Used to report interest income
Form 1099-DIV: Used to report dividend income
Form 1099-MISC: Used for a variety of other income and payments
Form 1099-B: Used to report the sale of stock or mutual funds

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Finally, it's important to note that if you do have money withheld from W-9 income as backup withholding, you should claim it as money withheld when you file your tax return. Even though the flat backup withholding rate is 28%, your actual tax liability may be more or less than this amount, and your tax return will determine whether you are entitled to a refund or need to pay more.

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