For businesses, knowing the difference between IRS Form W-9 and IRS 1099. While Both forms are used in issuing payments, there is a distinct difference between them. Read out to know more!
Do you feel that you are running a maze when it comes to IRS forms?
Don’t worry; you are not alone! Most of us feel overwhelmed when understanding the tax forms and the nitty-gritty. It becomes even more daunting when two forms appear almost similar. And that’s the case with IRS W-9 and 1099.
But don’t worry; you are in the right place. We will help you understand the difference between these two forms so your business can run smoothly without any hassles.
So, Let’s get started!
What Is Form W-9?
Form W-9, also entitled “Request for Taxpayer Information and Certification,” is used by businesses when they need to obtain a taxpayer’s identification number to file information returns, such as 1099s. Form W-9 includes name, address, and Social Security Number (SSN). It is an important IRS form as it ensures that the business pays taxes on behalf of its independent contractors or subcontractors.
What Is Form 1099?
Form 1099 is an important IRS form used by businesses to report any payments they have made to independent contractors or subcontractors. It is called an information return form and contains details such as the amount paid, the date of payment, the type of payment, and whether taxes were taken out. The business must provide a copy of the completed Form 1099 and a copy to the IRS for it to be reported on income tax returns.
Who Requires To Fill Out the W-9 Form?
The W-9 form is used by businesses and individuals to record payment information for independent contractors or subcontractors. The business must provide the form to each contractor and subcontractor to report any payments they have made. The contractor will then fill out the W-9 form with their identifying information, including name, address, and Social Security Number (SSN) or Employer Identification Number (EIN).
Who Requires To Fill Out the 1099 Form?
The 1099 form must be filled out by any business or individual who has paid an independent contractor or subcontractor more than $600 in a tax year. The 1099 form details how much money was paid to each contractor during the tax year, which can then be reported on income tax returns. The paying party usually completes this form and then sends it to both the recipient of the payment and the IRS.
Key Differences Between Form W-9 and Form 1099
As of now, you must know that Form 1099 and Form W-9 are related in certain ways. But it is important to know the key differences between these two forms. So here’s a breakdown of the differences between Form 1099 and W-9:
| Difference | Form 1099 | Form W-9 |
| Based on the Type of Form | Form 1099 is an informational return | Form W-9 is an IRS request for taxpayer identification information. |
| Based on Recipient | Form 1099 is prepared and sent to the contractor who received money from a company | Form W-9 is completed by the contractor and returned to the company. |
| Based on Purpose | Form 1099 is to report income earned by independent contractors | Form W-9 is to provide the IRS with the contractor’s taxpayer identification information, and Social Security Number (SSN). |
What Are The Deadline For Form W-9?
Since the W-9 is not submitted to the IRS, there is no specific deadline for Form W-9. The company typically requests the form when they initiate payment to contractors. The contractors should promptly provide it so the payments can be processed in compliance with IRS regulations.
What Is The Penalty For Not Providing A Form W-9?
The penalty for not providing a Form W-9 is generally assessed on the payer (the company) rather than the contractor. Suppose a contractor refuses to provide a completed form or provides an incomplete or incorrect form. In that case, the payer must withhold 28% of payments made to them as backup withholding and report it on their federal tax return.
However, if a payer fails to comply with backup withholding requirements, they could face a penalty of up to $100,000 or even a criminal investigation. It’s important to remember that Form W-9 is legally binding, so it should be treated with care and accuracy.
What Are The Deadline For Form 1099?
Form 1099 must be sent to the contractor by January 31st of each year. This form reports income that contractors have received throughout the previous tax year and is important for filing taxes correctly. The payer must also file a copy with the IRS by February 28th (March 31st if filing electronically). It’s important to meet these deadlines, as failure to do so could result in fees or penalties from the IRS.
Who Is An Independent Contractor?
It’s important to understand how to classify workers as independent contractors or employees because it affects the forms they must submit and the taxes they may need to pay. An independent contractor provides services to a company or individual but is not an employee of that company or individual. They’re usually paid for a single job or project rather than receiving regular wages.
The independent contractor relationship is intended to be temporary, as independent contractors rely on their own skill set and resources to complete a particular job. They are not entitled to the same benefits that an employee would receive, and they may typically be paid on a project or task basis.
Tax1099: The Perfect Solution For 1099 eFiling And W-9 Needs
Let’s face it, filing 1099 forms and W-9s can be a huge headache, especially if you’re not sure what needs to go where. Fortunately, Tax1099 makes the process easier with its intuitive interface and comprehensive features.
With Tax1099, you can easily create and manage your own 1099 eFiling accounts and get real-time vendor profile updates. You can quickly send out W-9s, track vendor information, and store documents securely.
Here are some of the prominent features of Tax1099 that make eFiling a breeze for business:
1) Real-Time TIN Match: An incorrect TIN can cost your business a fortune in fines. Tax1099 helps you avoid that by providing real-time TIN matching and verification. This ensures all your vendor information is accurate.
2) 11+ Integrations With Accounting Software: This allows you to quickly export and import information into your accounting software. So no more manual entry of data! From QuickBooks, Xero, and Bill.Com, to many more, we’ve got you covered.
3) API: No one likes dealing with manual paperwork. Tax1099 simplifies the process by allowing you to file taxes electronically through its API integration. You can quickly create custom applications that integrate with your system, reducing the time spent on tedious paperwork.
4) Scheduled eFile: Automatically file tax forms at the date and time of your choice! Removing human error from the tax filing process ensures accuracy and reliability. No more late nights frantically working to beat the deadline, just the luxury of sleeping knowing everything is taken care of.
With so much to gain from Tax1099, it’s no wonder that businesses of all sizes are embracing electronic filing. Get started today and experience the ease and convenience of tax filing with Tax1099! Your future self will thank you.