January To Do: W9 + 1099 (Due January 31)

Ready to start a business but don't know where to begin? Candice talks about W9 and 1099 tax forms.

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Intro

Understanding W9 and 1099 Tax Forms

What are 1099’s and W9’s anyway? In simple terms, a W-9 is a form that you fill out to give to a business that is going to pay you for work. Now, it most likely won't be needed if they don't pay you at least $600 in a calendar year. Rather than adding another task to your list, it's better to have it than having to hunt someone down to get it. Every time we start a new year, or hire a new contractor or business, I always ask for a completed W-9. That way I'm prepared for my accountant. It's my policy and a lot of company policies to have a completed W-9 on file before they get paid the first time.

If a business that we hire is an S Corp or C Corp, (we're an S Corp for our HVAC Business), they are not (at the time of this recording), required to complete W-9. Freelancers, subcontractors, small businesses, etc, who are sole proprietors or partnerships, will need to complete W-9. So for example, my VA is not an employee, she is her own business. So she completes a W-9, and she is a sole proprietor as well.

We use a crane company, for our air conditioning company whenever my husband’s installing equipment on a roof. He will use a crane company and they provide me with a W-9 at the beginning of the year as well, then we pay them. I request at the beginning of the year if it's somebody that we have already done business with because it's just easier that way, we're going to do business with them again, so we'll go ahead and have that on file. If it's someone that we may do business with that year, or may do business with another year, like maybe we'll skip a year or two, then we'll just ask for it at the time we get there that we hire them to get W-9 from them before we pay them.

I'm sure you're saying, “Candice, what information is on a W-9?” Well, I'm glad you asked. A W-9 will ask for your details: name, address, social security number, signature, and date. And then that leads me to 1099s.

What is a 1099 you ask? That is the form that the freelancers, subcontractors, small businesses, sole proprietors, and our partnerships will receive from the payer – which is me in this example. By January 31 of the next year, the previously named can file with their taxes. So, if you're a sole proprietor and you still have a job that you work for, or you're still an employee for somebody, then you would have a W2. And if you work for someone as your business, then you would also receive a 1099. And then you would file both of those with your taxes.

Thing you need to remember about W9 and 1099s, if you're a 1099 contractor, (which is the most common way to say it,) it's not a 1099 employee, because they're not your employee. But if you're a 1099 contractor, the thing you have to remember is that the person paying you, the company paying you is not taking out any taxes for your income that you're receiving. That is your responsibility as your own business for self, as a freelancer, you're your own business. You have to remember to take out your taxes, because otherwise, if you do a lot of work like that, and you have high ticket things that you do, then you're going to have a lot of tax, so always start ahead of time. Anytime you receive funds, as a 1099 contractor, always plan to have a percentage of that taken out of yourself for taxes. That way, at tax time trying to figure out you know, while you owe $20,000.

A 1099 has the information that is on the W9 along with the amount of money that you receive from that payer, so you can report your income on your tax return. There are several 1099s with any C which is non-employee compensation, and miscellaneous, which is for reporting rents, royalties, prizes, awards, and other fixed determinable income being the two most common. For 1099s, non-employees, and W2s employees are required to be sent electronically or emailed by January 31.