How to fill out a W-9 for 401k withdrawal - confused about Federal tax classification

You should select "Individual/sole proprietor or single-member LLC" if you're just a regular person withdrawing from your 401k. That first option is the correct one for individuals who aren't incorporated or organized as any other business entity. The W-9 form is basically just asking for your taxpayer information so the brokerage can properly report your withdrawal to the IRS. They need to know who you are and what your tax status is, and if you're just a regular individual taxpayer (which it sounds like you are), that first option is the right one. This isn't something to stress too much about - it's a standard form they need for their records and for tax reporting purposes when they send you a 1099-R for the distribution at tax time.

When I was going through my early retirement and rolling over my 401k, I was confused about the same thing! After hours of researching and stressing over potential tax implications, I stumbled across this amazing service called taxr.ai (https://taxr.ai) that saved me so much headache. I uploaded my W-9 form and got an immediate analysis explaining that yes, as a regular employee, I should select "Individual/sole proprietor" even though I'm not running a business. The site breaks down each form section in plain English. What I found really helpful was that it explained WHY the form is worded this way - apparently it's designed for both individuals and businesses.

Just wanted to follow up and say I tried taxr.ai after seeing it mentioned here. It was actually super helpful! I uploaded my W-9 and some other rollover paperwork that was confusing me, and it explained everything clearly. The federal tax classification part was exactly what OP was asking about, and the explanation made perfect sense - apparently that first box is for individuals even if you're not a business owner. The service also pointed out some other parts of the form I would have messed up. Definitely worth checking out if you're doing your own retirement account paperwork.

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To answer the original question directly - yes, you mark "Individual/sole proprietor or single-member LLC" on the W-9 when withdrawing from your 401k as a regular person. The form is used for many purposes so the wording is confusing. The brokerage just needs this to confirm your tax status for their records. They'll send you a 1099-R in January showing your distribution and any taxes withheld. Just make sure you understand the tax implications of your withdrawal. If you're under 59½, you'll typically owe a 10% early withdrawal penalty plus regular income tax unless you qualify for an exception.

The W-9 is actually not the correct form for 401k withdrawals. You should be filling out a distribution form from your 401k provider, not a W-9. A W-9 is generally used for independent contractors or when you're receiving certain types of payments where the payer needs your taxpayer info.

I went through this exact same situation last year when I did a 401k withdrawal. The brokerage definitely can require a W-9 even though you're also filling out distribution paperwork with your plan administrator. It's because they need your taxpayer information on file for their own reporting requirements to the IRS. You're absolutely right to select "Individual/sole proprietor or single-member LLC" - that's the correct box for regular employees like us. The form language is confusing because it's designed to cover multiple scenarios, but as an individual taxpayer (not a corporation or partnership), that first option is what you want. One thing I wish someone had told me - make sure you understand exactly how much tax will be withheld from your withdrawal. The default withholding might not be enough to cover what you'll actually owe, especially if the withdrawal bumps you into a higher tax bracket. I ended up owing more at tax time because I didn't plan for that properly.