A W-9 Form is used for tax filing purposes. This form is used to get information from a person who you may be hiring or an independent contractor you are planning on using.
The 1099-MISC is used to report certain types of non-employee income. As of the 2020 tax year, the 1099-MISC is now only used to report the following types of income worth at least $600:
Additionally, use a a Form 1099-MISC for:
Compensation for freelancers and independent contractors are no longer reported using a 1099-MISC. Instead, they are reported using a 1099-NEC.
This document, technically known as the 1099-MISC Form, is a tax document that confuses. Who gets one? Who doesn't? Do I need to send them out? Many a bewildered business owner just decides not to bother with it because they just don't know what to do. Fortunately, this form is relatively simple to understand and easy to fill out once you grasp the basics of completing the form and who needs to receive one.
The IRS provides specific and clear instructions on when a 1099-MISC must be used. For example, if you received at least $600 in rental income, you would use a 1099-MISC. If you paid a lawyer at least $600 for legal services of some kind for your business, you can send them a 1099-MISC. If you received a prize or an award worth at least $600 or if you give out a prize worth at least $600, a 1099-MISC is required. If you were paying an independent contractor or freelancer for at least $600 in services, you would use a 1099-NEC.
The individual or business receiving a 1099-MISC can use it in addition to or in place of the W-2 that they would win in a standard employment arrangement.
As previously mentioned, it is also used to report a prize or award from a business. It reminds the recipient that they must pay taxes on that item or income (if they haven't done so already). It provides documentation that tells them exactly how much they've received from your business.
Don't delay or skip sending out the document by the end of January for the previous tax year. Failing to send it out as required can be punishable by fines of $60.00 to $310.00 per form.
If the IRS proves that a business intentionally disregarded the law when they failed to send out the proper form, the penalty starts at $630.00 per missed statement and with no maximum.
There are quite a few exceptions for which you do not need to send out a 1099-MISC (although this does not mean that the income is not taxable for the recipient). You're not required to send one to real estate agents or sellers of merchandise, storage, freight, etc. However, you are required to send one to any lawyer that you paid more than $600 to in a calendar year, even if they work with a law firm.
The new Form 1099-NEC is for employers to document non-employee compensation for independent contractors and freelancers. Independent contractors must receive Copy B of the 1099-NEC in order to include it with their tax returns.
These conditions must be met to report payment for non-employee compensation:
As aforementioned, payers are required to provide a Form 1099-NEC to the payee and file it with the IRS by January 31st of the following year.
A W-2 Form, also known as a Wage and Tax Statement, is a form that an employer completes and provides to the employee to complete their tax return. Form W-2 must contain certain information, including wages earned and state, federal, and other taxes withheld from an employee's earnings. The Form W-2 must be provided to employees by January 31. Employers must also file a copy with the Social Security Administration to keep them aware of an employee's earnings by January 31.
If you need to complete it, make sure you include all the required information. You will also need the employee's personal information, such as their full legal name, address, social security number, and employee ID. Check for accuracy. Using the wrong information could cause problems for both the employer and the employee when they file their income tax return.
Please note: this form is only used for employees and not self-employed independent contractors or freelancers.
The W-9, or Request for Taxpayer Identification Number and Certification form, provides a business with relevant personal information about an independent contractor (IC) or freelancer for tax purposes in the United States. The form asks for information such as the IC's name, address, social security number (SSN), and more. The data is used to generate a 1099-NEC. The W-9 Form is an essential tool for employers to gather information about contractors for income tax purposes. Verifying the information on this form and keeping it up-to-date ensures you collected accurate personal information.
Form W-9 should be reviewed and updated yearly. However, if a contractor provides you with an updated address or a name change, those changes may be recorded for use. The business should retain the information on this form for several years. It should not be sent to the Internal Revenue Service. Remember that it is a tool to gather specific information that a business needs to complete a 1099-NEC if the contractor earns more than a certain amount during the tax year.