, , ,

What is a W-9 Form and Form 1099-MISC

W-9 form pic

Dear Limousine Operators,

This article is intended for limousine operators who are new to being self-employed and not familiar with the Form 1099-C and W-9.  Many new operators are surprised when they receive a W-9 form from a company that contract jobs to them, and they are reluctant to provide their social security number and other sensitive information. So this article shed light over this form, and some related information about it.

 

What Is a W-9 Form? 

W-9 Form: Request for Taxpayer Identification Number and Certification

A W-9 form is used to collect information about you (if you work under a dba only), or your business (If you are incorporated), that can be used by the person paying you to complete an informational report for the IRS, such as a 1099-MISC form.

You can download the form here from the IRS website

 

What Is a Form 1099-MISC?

Form 1099-MISC.- Miscellaneous Income

Businesses most commonly use IRS form W-9, Request for Taxpayer Identification Number and Certification, to get information from vendors they hire as independent contractors (also called affiliate in the limousine business). When a business pays an independent contractor $600 or more over the course of a tax year, it is required to report these payments to the IRS on an information return called form 1099-MISC. Businesses use the name, address and Social Security or tax identification number from form W-9 to complete form 1099-MISC.

You can download 1099 form here from the IRS website

 

How to fill up a W-9 Form?

To complete Form W-9, you’ll need to enter your full name as shown on your federal income tax return on the first line. If you are operating a business under a separate name, you should enter that on the second line. In the next section, you select your tax classification. Most employed and self-employed taxpayers will select Individual/Sole Proprietor”. Professionals who operate partnerships, corporations or estates should select the appropriate classification for their situation.

Taxpayer identification number

After you complete the mailing address section, you’ll need to enter your taxpayer identification number, or TIN. Generally, this is your Social Security number. Nonresident aliens who do not have Social Security numbers should enter their assigned TIN in this field.

If you’re running your own business and you have an employer identification number, you should enter that number next to the EIN field. Sign and date the form at the bottom.


Who Must Issue Forms 1099-C?

The Instructions for Form 1099-MISC from the Internal Revenue Service explain the various situations that require a business to issue Forms 1099-MISC.

You must complete, file and issue this form to all vendors or contractors—not employees—to whom you have paid $600 or more during the year.

As an example: Capital Limousine farm out some trips for $600 to Big Guy Limo, Capital limousine will request a W-9 from Big guy limo, once the later fill up the W-9 and send it back to Capital Limousine, then Capital Limousine will issue a 1099-C Form to Big guy limo.

 

Exceptions:

You do not have to issue 1099-MISC forms to C- and S-corporations or to entities from whom you purchase products, such as merchandise you’ll later resell.

Payments made to contractors and vendors by debit card, credit card or through third parties like PayPal are also exempt—the IRS uses a different method to track these transactions.

 

Information Needed

Form W-9 asks for the independent contractor’s name; business name (if different); business entity (sole proprietorship, partnership, C corporation, S corporation, trust/estate, limited liability company or “other”; and the business’s tax identification number (or Social Security number, for sole proprietorships that don’t use a separate tax ID number). Form W-9 also asks the person filling it out to certify that he or she is exempt from backup withholding. Most taxpayers are exempt, but if they aren’t, the company hiring the independent contractor will need to withhold income tax from that contractor’s pay at a flat rate of 28% and send it to the IRS.

Since form W-9 requires listing a tax ID or Social Security number, both the person filling it out and the company receiving the completed form must guard the form carefully to protect against identity theft.


When to Ask for a Completed Form W-9?

It’s a good practice to request that an independent contractor provides a completed Form W-9 as soon as the business knows it will have to issue him a 1099.

But sometimes we let these requests slide until January when we’re looking over our accounting records and realize we haven’t gotten around to it.

If you must issue a 1099-MISC and don’t have a completed W-9 form on file, say something like, “Hey, I’m going to be sending out your 1099-MISC by the end of January and I realized I don’t have a W-9 from you. Could you fill out one and send it to me?” This lets the contractor know that the information on the Form W-9 will be used to generate a specific tax document.

Encourage people to send you their completed Form W-9s in a secure manner. A completed W-9 includes sensitive information such as a person’s Social Security number. This data should be kept as private and secure as possible to minimize the risk of the data falling into the wrong hands. Transmitting a completed Form W-9 as an insecure file attachment to an email is not recommended. Ask to receive it by mail, hand delivery, or as a password-protected file attachment to an email.

 

I hope this quick article will help you understand why companies request W-9 Forms from you. The best way to deal with this requirement is to download the form from the IRS website, fill it up, sign it, and have it ready, anytime you get a request, it is already there, just mail it to them, or even better, anytime you receive farm out from a company for $600 or more, just send them the form in advance, it would make you very professional.

You can download W-9 form here from the IRS website

 

Jon Ouazdi

Admin

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *