How are forms W-9 and 1099-NEC different from each other? This quick guide will help you understand the fundamental differences between these most-used IRS forms.
Form W-9 and Form 1099-NEC are some of the most used informational forms used in business taxes. While the former is used for obtaining the taxpayer identification number of the vendor, the latter is used for reporting the non-employee compensations made to vendors in a tax year.
The following will discuss in detail the overview of forms W-9 and 1099-NEC, key differences, and different approaches to using these forms.
Form W-9: An Overview
Form W-9 is used for requesting TINs from vendors or payees. The form is for informational purposes only and need not be filed with the IRS. W-9 is sent by the payer to the payee in order to request the taxpayer identification number and name of the vendor per the official records.
The payee (vendor) must furnish the required information, certify that the provided information is correct and valid, and send the updated form back to the payer. A copy of the same will be saved by the payee for documentation purposes.
The payer must then furnish the vendor TIN and name of the vendor as provided in the W-9 Form in the concerned IRS returns.
Form 1099-NEC: An Overview
Form 1099-NEC is an informational return that must be submitted by business entities when businesses pay independent contractors $600 or more in a year for utilizing the services from the vendor.
Payments amounting to $600 or more, made to independent contractors through the course of business in a tax year are termed as ‘nonemployee compensations’ and all these payments must be reported to the IRS through Form 1099-NEC.
Example: Hiring a logo designer for a month and paying $650 to the designer after completing the work is a nonemployee compensation transaction and it must be reported in Form 1099-NEC.
Difference Between Form 1099-NEC And Form W-9
| Form W-9 | Form 1099-NEC |
| W-9 is used to obtain the taxpayer identification number of the vendor | 1099-NEC is used to report the non-employee compensations made during a tax year |
| Form W-9 is for informational purposes only | Form 1099-NEC is used for tax reporting purposes |
| W-9 need not be submitted to the IRS | 1099-NEC must be filed with the IRS |
| Penalties are not applicable on Form W-9 | Failure to filing Form 1099-NEC can result in IRS penalty assessments |
| W-9 is sent by the payer to the payee | 1099-NEC is filed by the taxpayer with the IRS |