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All About W-9 & 1099 Forms For Freelancers

Death and Taxes are two major events that we all can count on; debatable is which one produces the most dread. Every April, tax season rolls around and we all know what that means, filling out IRS forms. Lost in the abyss of filing taxes and filling out forms, can result in feelings of confusion and frustration. And no greater confusion can result than dealing with either the W-4 form or the W-9, one used by employees, the other by independent contractors. It is a matter of ying and yang, and mixing the two up can result in bad karma.

W-4 “Employee’s Withholding Allowance” form

Nothing says, “I am an employee” like a W-4 “Employee’s Withholding Allowance” form. Name, rank, and serial number is basically what is required of employees who fill out a W-4 form. For example: Jane Doe (name), 7756 East Avenue (address), 990-000-1122 (social security number), and Single(marital status).
However, the W-4 “Employee’s Withholding Allowance” form is mainly used to estimate an employee’s tax-holding for both the benefit of employer and employee.

W-9 “Request for Taxpayer Identification Number and Certification” form

On the other end of the spectrum is the W-9 “Request for Taxpayer Identification Number and Certification” form. Think of the W-9 form, ying to W-4 form’s yang. W-4 form: calculate an employee’s tax-holdings. W-9 form: no calculation is necessary. W-4 form: name, rank and serial number is necessary. W-9 form: identifies and checks an independent contractor’s taxpayer identification number - their social security or employer identification number.

Deconstructing the 1099-Miscellaneous Form

Independent Contractor’s Criteria: As an independent contractor there are three things you need to ask yourself before deciding to file an 1099-Miscellaneous Form. Have I, at least, earned $600 dollars during the year? As an independent contractor did I received payment for services, parts or materials? Have I filled out and sent a W-9 form to the agency issuing the 1099-Miscellaneous Form-the employer or freelance website that hired and paid you for services, parts and materials. Again, if an independent contractor can answer, ‘yes’ to these three questions they are required to file a 1099-Miscellaneous form with the IRS. If an independent contractor answers, ‘no’ then they are not required to file a 1099-Miscellaneous form.

Company’s Criteria - A company’s criteria for participating in IRS 1099 tax service is simply a matter of 1, 2, 3, 4.

    Wages was made to an independent contractor .
    Wages exceeded $600 within a year.
    Wages was made to an individual or partnership.
    A W-9 form was completed and sent to the issuing agency-a freelance website or employer if they are not involved in a freelance website’s 1099 program.

Knowing what form to fill out and knowing the difference between an Independent contractor and an employee can save you a lot of headaches, not to mention a trip to the IRS.