e-File Form 1099-NEC with us Start Filling Now >>

e-File Form 1099-NEC with us Start Filling Now >>

What is Form W-9?

You need to send a Form W-9 to an independent contractor or a freelancer if you paid them a service fee of $600 or more. The contractor needs to provide his/her contact information and tax number on Form W-9. You will need these details while filing Form 1099-NEC.

  • It is your duty to provide Form W-9 to the contractor before the end of the financial year
  • The contractor must furnish all the details and return the form to you
  • You don’t need to submit Form W-9 with the IRS

You must get form W-9 from the contractor and keep a copy of it for future reference.

What is form W-9 used for?

If you are filing form 1099-NEC, you need to include details of the non-employee. You can send Form W-9 to the non-employee to collect such details. The nonemployee must specify the following details on the form.

  • Any compensation received by the contractor from you
  • TIN (SSN or EIN)
  • Legal name and address
  • Exemptions (from backup withholding or FATCA reporting)

What is the difference between Form W-9 and Form 1099-NEC?

The difference between form 1099-NEC and form W-9 is their use cases and the information disclosed in them.

Form 1099-NEC

Form W-9

Form 1099-NEC must be filled out and submitted to the IRS by a business entity. 

Form W-9 needs to be filled out and returned to the business by the contractor. 

Form 1099-NEC is used to declare compensations that a business has paid to a contractor. 

Form W-9 is used by a contractor to provide tax and related details to the business. The business will refer to the details and  include it in Form 1099-NEC. 

A business needs to submit Form 1099-NEC to the IRS if they have paid a compensation of $600 or more to a contractor. 

A contractor needs to submit form W-9 once to the business. He/she may need to send the form again incase of address or TIN change. 

The business entity must provide a summary of the contractor’s compensation to the IRS and the contractor. 

The contractor must provide his/her legal name, address, and taxpayer identification number or Social Security number to the business. 

The business entity needs to send one filled out copy of Form 1099-NEC to the contractor, and another one to the IRS.

Business needs to send a blank copy of Form W-9 to the contractor, who then furnishes the information and returns it to the business. 

A business entity must submit Form 1099-NEC to the contractor and the IRS by January 31st.

A business must send Form W-9 to the contractor before they begin working together.

Where to get Form W-9?

You can download Form W-9 for free from the IRS's website. You can take a legible print out of the form and send it to the contractor.

Who should furnish Form W-9?

Independent contractors or freelancers who have received a compensation of $600 or more from you should file Form W-9.

Details to be specified on form W-9

When you request form W-9 from a nonemployee, you need to ensure that he/she has specified the following information on the form:

  • Contractor nameThe name of the contractor should be the same as shown on his/her income tax return.
  • Business name/disregarded entity nameThe contractor’s business name, trade name, DBA name, or disregarded entity name, if applicable.
  • Federal tax classification details Applicable for corporation, sole proprietorship or single-member limited liability company (LLC), Partnership or a Trust/estate
  • ExemptionsIf the contractor is exempt from backup withholding and/or FATCA reporting, he/she needs to state it.
  • Address The contractor’s address (including street, and apartment or suite number). You will need these details to mail Form W-9 returns. If the contractor’s address has changed, he/she needs to write NEW at the top of the form W-9.
  • City, state, and ZIP code of the contractor
  • Account numbers It is optional to enter the account number. If you’re filing multiple forms for the same person, you can include a unique account number on each form for the IRS to cross verify.
  • Taxpayer Identification Number (TIN)The contractor must specify their social security number (SSN). If he/she is a resident alien who does not have (or is not eligible for) an SSN, he/she needs to specify his/her Individual Taxpayer identification number (ITIN). If the contractor is a sole proprietor, then he/she needs to specify their EIN or SSN.

    If the contractor is a single-member LLC that is disregarded as an entity separate from its owner, then he/she needs to enter the owner’s SSN or EIN (do not enter the disregarded entity’s EIN). If the LLC is classified as a corporation or partnership, enter the entity’s EIN.

  • Contractor’s signature The contractor must declare that he/she is a U.S. citizen or a resident alien by signing the Form W-9.

Why do you need to provide Form W-9 for contractors?

If you are a business owner, you’re not required to withhold or pay taxes while offering payment to an independent contractor. However, you are expected to gather, track, and report their earnings because the IRS requires them to pay taxes on their own.

Whether the contractor pays his/her tax or chooses not to, you are responsible for ensuring that they receive accurate earnings information by 31st January of the tax year. Without this information, your contractors will not be able to pay their taxes.

What happens if you don’t collect a W-9 Form?

If you do not collect form W-9 from a non-employee and fail to issue the 1099-NEC form, the IRS will impose a penalty for non-issual of the form. The penalty for failure to file is $270. An additional penalty of $270 will be imposed if you fail to issue Form 1099-NEC to the contractor.

The IRS also reserves the right to deny deductions for the expenses you failed to file. Therefore, it is imperative that you request a W-9 from all the contractors that you do business with.

What is the deadline for filing Form W-9?

There is no deadline for filing Form W-9. This is because you are not required to file Form W-9 with the IRS. However, it is recommended that you collect the Form W-9 from the contractor as you will need to specify the details furnished by him/her while filing your form 1099-NEC by 31st January.

How often should a contractor update Form W-9?

A contractor needs to submit Form W-9 to the client any time when he/she extends his/her services to your business. A contractor also needs to submit a new Form W-9 if their name, business name, address, Social Security number, or employer identification number has changed.

Final Thoughts

Although tax filing is a tough nut to crack, it plays a crucial part in avoiding penalties during auditing. But you’re sure to get a hang of all the formalities in no time once you start filing your form 1099-NEC and issuing Form W-9 to the respective contractors. Before anything, make sure you hand out form W-9 to all the contractors you work with as it will be one less thing to worry about as the filing season closes in.

The deadline to file 1099-NEC is January 31. Use Freelance Central for easy and fast filing. Register with us now and file your first form for free. Hurry!
The deadline tofile 1099-NEC is January 31
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