IRS Forms 1099 VS W9: What's The Difference?
Independent contractors and businesses that hire freelancers must understand the difference between 1099 forms and W9 forms to ensure they are prepared for the tax season.
- Employers fill out 1099 tax forms for each independent contractor who was paid more than $600 during a single tax year, whereas independent contractors fill out W-9 tax forms to provide employers with their taxpayer identification number or employer identification number.
- Independent contractors have the ability to set their own hours and rates and report income tax information to the IRS using 1099 forms, whereas employees must work the hours and rates agreed upon with their employer and report income tax information to the IRS using W-2 forms.
- Some similarities between the 1099 forms and W9 forms are that employers and contract workers need both forms and the income requirement for filling out the forms is $600.
- Some differences between the 1099 forms and W9 forms are who fills out the form, the details required to fill out the form, who receives the completed form, and the form submission deadlines.
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1099 Vs W9
While there are many similarities to these tax forms, such as who uses them and the income requirements, these forms differ in who must fill out the form, the deadlines to fill out the form, and the tax form filing requirements.
What Is IRS Form 1099?
IRS 1099 Tax Forms are filled out by businesses to report the earnings paid to each independent contractor who has earned more than $600 during a single tax year.
There are multiple types of 1099 forms, but some of the most common include 1099-NEC: Nonemployee Compensation and 1099-MISC: Miscellaneous Information.
What Is IRS Form W-9?
IRS W-9 Tax Forms are filled out by independent contractors to provide tax identification information to a business for tax purposes.
Freelancers are required to fill out W-9 forms when they expect to earn more than $600 during a single tax year.
1099 Independent Contractor Vs. W-2 Employee
Workers in the United States are classified as 1099 contractors or W-2 employees, and depending on the circumstances of an individual’s employment, there will be differences in the way they are taxed.
1099 Independent Contractors
Independent contractors are self-employed individuals who are hired on a project-by-project basis by a company so that they can set their own hours and rates.
As independent contractors are considered self-employed, they will be responsible for paying the full self-employment tax rate of 15.3% of their income, an amount that is split between employee and employer for W-2 workers.
Terms for contract workers who may receive 1099 forms include:
- Self-employed individuals
- Independent Contractors
- Gig workers
W-2 employees receive regular paychecks from the company they work for and may be able to receive benefits, such as health insurance or retirement plans, through their employer.
Additionally, the employer of a taxpayer who earns hourly wages or a salary holds the responsibility for managing employee tax withholding and paying half of the 15.3% employment tax rate, a value of 7.65%, rather than the worker having to pay the full tax amount like independent contractors are required to.
Similarities Between 1099s and W9s
Who Needs The Form For Taxes
1099s: Both employers and freelance workers need the 1099 form.
The employer needs to fill out 1099 forms for each qualifying freelancer they hire, and freelancers need 1099s to file their federal income tax returns.
W9s: Both employers and freelance workers need the W9 form.
The freelancer uses W9 forms to provide companies with their social security number (SSN) or taxpayer identification number (TIN), and the employer uses the information provided on the W-9 form to fill out the 1099 form.
Income Requirements For Requiring Tax Form
1099s: $600 or more during a single tax year
W9s: $600 or more during a single tax year
Both 1099s and W9s must be filled out when a contract worker is paid $600 or more by a company during the tax year.
Differences Between 1099s and W9s
|Topic||1099 Forms||W9 Forms|
|Purpose||For businesses to report earnings paid to independent contractors.||For independent contractors to provide tax identification information to a business.|
|Filled Out By||Employers||Independent Contractors|
|Details Required||Payer’s name, address, TIN, payee’s name, address, TIN, total annual earnings, federal income tax withholding.||Contractor’s name, business entity name, status, exemptions, address, taxpayer identification number (SSN or TIN).|
|Who Receives the Completed Form||Independent Contractors||Employers|
|Submission Deadlines||After the tax year ends, no later than January 31||As soon as possible but no later than January 31|
|Income Requirement||$600 or more during a single tax year|
Who Fills Out The Form
The payer at a company will fill out a 1099 form for the payee to do their taxes during the tax season.
W9s: Independent Contractors
Independent contractors will provide the business owner with their tax information by filling out IRS Form W-9.
Information Needed To Complete Form
1099s: The payer’s name, address, and TIN, the payee’s name, address, and TIN, the total annual earnings, and any federal income tax withholding amounts.
W9s: The contractor’s name, business entity name (if applicable), business entity status (Single-Member LLC, S Corporation, C Corporation, Partnership, Trust/Estate, Individual/Sole Proprietor), exemptions, address, and taxpayer identification number (SSN or TIN).
Who Receives The Completed Form
1099s: Independent Contractors
Independent contractors will receive a completed 1099 form from companies they do contracted work for.
Employers will receive a completed W-9 form from freelancers they hire.
1099s: After the tax year ends no later than January 31
1099 forms must be sent to contract workers by January 31 following the year the income was earned so they can file their tax returns.
W-9s: As soon as possible but no later than January 31
While there are no IRS deadlines for a freelancer to submit a W-9 to a business, they should provide their tax information to business owners as soon as possible to ensure they meet all the tax deadlines.
If you have more questions about the difference between 1099s and W9s or need help filing your federal income tax return, taking advantage of a free consultation with a licensed tax preparer is the best strategy to ensure you are minimizing your tax liability. Contact the tax pros at Ideal Tax today.