If you are self-employed or employ other people as a small business owner, there are several different forms to consider when reporting to The Internal Revenue Service (IRS), including the W-9 form and various 1099 forms. The January 31, 2024 deadline for employers to file wage statements and independent contractor forms is fast approaching, and it is also important to have everything submitted to your tax accountant on time (Tax Day is April 15, 2024), to avoid penalties. But first, let’s discuss what you need to know about the 1099, 1099-K, and W-9 forms.
What is a W-9?
A W-9 form is used to document identifying information, including the correct name, address, and Taxpayer Identification Number (TIN), for independent contractors and freelancers. If you or your employees fall under this umbrella, The IRS states “the first step is to have the contractor complete Form W-9, Request for Taxpayer Identification Number and Certification.” Note that if you submit the W-9 as an individual, your TIN is typically your Social Security number, and if it’s for your business, the TIN is usually your Employer Identification Number (EIN).
Investopedia notes that the W-9 form differs from the W-2 or W-4 form in that it “does not inherently arrange for the withholding of any taxes due.” However, when a W-9 is not completed, as requested, the paying party is obligated to withhold taxes at a rate of 24%, per Investopedia. While the paying party is responsible for requesting the W-9 form, they are not required to file the W-9 with the IRS. Instead, “W-9s are used by businesses to generate 1099s, which are then sent to the taxpayer and the IRS,” according to Nerdwallet.
What is a 1099 and 1099-K?
Per Nerdwallet, a 1099 form “is a document sent to you by an entity that paid you certain types of income throughout the tax year. Getting a 1099 doesn’t mean you necessarily owe taxes on that income, but you will have to report it to the IRS on your tax return.” Working with a certified accountant can help you achieve the best results this tax season, whether you shelled out or received said payment.
It is vital to understand that there are different types of 1099 forms, for tax purposes. A breakdown of each can be found here via Nerdwallet, including the 1099-K, required if you received “$20,000 or more of business income or payments for goods and services via credit card or a third-party payment system,” the 1099-MISC, the 1099-NEC, for nonemployee compensation, and more.
The IRS advises keeping W-9 forms, 1099 forms, and other employment records in your files for a minimum of four years, for future reference when needed. Tax laws are trickier than ever for the self-employed and small business owners, and adding several different forms into the mix makes tax season even more complicated. Having a trusted and experienced tax accountant (and small business bookkeeper) like Anthony F. Drake can help to ensure everything is recorded and completed accurately, with the best possible outcome. Time is running out for Tax Year 2023. If you reside in the greater Philadelphia area and need assistance, contact Drake Tax Services today!
Drake Tax Services has been serving the Greater Philadelphia area since 1997. Its founder, Anthony F. Drake, is a professional accountant and IRS approved tax preparer who specializes in local, state and federal tax returns for both individuals and small businesses.
