In which cases would I need a w9?
If you as a business owner turned to a contractor to provide you with certain services and their cost was over $600, you will have to file a 1099-MISC for each such contractor at the beginning of the next tax year. However, you won’t be able to properly do if the contractor doesn’t inform you about their taxpayer identification number, first. Here comes the cause-effect relation. You must request the contractor's TIN because you will have to fill out form 1099-MISC, which the contractor will use to report their miscellaneous income and file the tax return.
So what about Form 1099-MISC?
Because, it isn’t easy to figure out the consistency of actions while filing form 1099-MISC for the first time, we strongly recommend to investigate the IRS guidelines at irs.gov. It describes several special cases, but the general rule is straightforward. It obliges you to fill out and issue 1099-MISC to all vendors or contractors who received income exceeding $600 during the year. Your employees don’t count, because you pay taxes for them. And self-employed individuals are to pay all the taxes by themselves. More detailed explanation of the difference between a contractor and an employee can be also found at irs.gov.
The Contractor/Vendor Rule Exemptions
If the contractor employed for certain services is a C- or S-corporation, you don’t have to file 1099-MISC for them. This is also true about entities from whom you purchased merchandise for the further sales.
The other exclusion are payments to contractors made by debit card, credit card or via online payment systems. The IRS has another method for tracking those transactions.
When should I request Form W-9?
The w 9 fillable form does not have a strict deadline for submission. The common practice is to ask the contractor furnish their business information (name, address and TIN) on the document the IRS requires once you’ve decided to have business with the contractor.
It’s a good idea to remind the contractor that they must provide you with their W9 for you to be able to send them their 1099-MISC as soon as the opportunity arrives and not to let it wait until the last moment. This allows you to persuade the contractor submit their W-9 in a timely and proper manner.
It is also important not to forget about security when completing and sharing tax documents with partners and employers. A filled out printable w 9 form must provide the contractor’s Social Security Number, which is obviously sensitive information. The filler should take care to prevent this data from being used by the unauthorized individuals. The same requirement is also applicable to the contracting party. They must ensure the secure storage of the received of the information shared with them.