Tax season can feel like navigating a maze, especially for contractors juggling multiple clients and income streams. Just when you think you’ve got it all figured out, terms like “W-9” and “1099” pop up to keep you on your toes. 

Fear not! This is where doola comes in to ease the burden. Our expert tax professionals and bookkeepers are readily available to help you demystify these essential tax forms and help you understand exactly when to use each one. 

Whether you’re a seasoned freelancer or just stepping into the world of contracting, this blog will give you all the insights you need to ensure you’re compliant—and confident—come tax time. 

Buckle up as we simplify contractor taxes so you can focus on what really matters: growing your business!

W-9 and 1099 Tax Forms for Contractors

Before jumping into W-9 to 1099 Tax Forms for Contractors and everything in between, let’s understand what a contractor is in terms of taxes. According to the IRS, a contractor is someone who provides goods or services on an independent basis rather than being employed by a company or individual. 

This means that as a contractor, you are responsible for paying your taxes and reporting your income. However, you are not the only one who has received the short end of the stick; your client also has to jump through a few hoops when it comes to tax forms.

If you are an employer hiring independent contractors, you need specific tax forms that are different from the ones given to full-time employees. When you begin working with a new client or company, they will likely ask you to fill out a W-9 form.

It’s the client’s responsibility to send the contractor Form W-9 before the end of the financial year. They will use it to collect your contact information, tax number, and other information. Then, the client will use that information to fill out a Form 1099 to report payments made to you. 

Form 1099 is another important tax form for contractors. This is used by clients who have paid at least $600 to contractors during the year. It details exactly how much money was paid during the year and must be sent to both the contractor and the IRS by January 31st of each year.

In addition to these main tax forms, contractors may also have to deal with other forms, such as Schedule C, which is used for reporting business income and expenses. If you work as a contractor while working a full-time job, you may also need to fill out Form W-2.

Understanding the W-9 Form

Also known as the “Request for Taxpayer Identification Number and Certification, the W-9 form is for independent contractors or freelancers who are paid more than $600 in a tax year by a single client. 

It is not applicable for regular employees, as their taxes are withheld by their employers. Instead, it confirms from the contractor to their client that they are not subject to backup withholding and are responsible for paying their taxes.

When exactly should you use a W-9 form? As mentioned earlier, if you are working as an independent contractor or freelancer, you must fill out the W-9 form shared with you by the client and send it back to them before any payment can be made. 

This includes all types of work, such as consulting services, freelance writing assignments, graphic design projects, etc., that will pay you $600 or more in a tax year. 

However, if you have registered a business name or incorporated as an LLC, consult with a tax professional if you are unsure about which forms to use or how to report your earnings as an LLC.

Understanding the 1099 Form

If you are a contractor or freelancer who receives at least $600 in non-employee compensation within a tax year, then you need to use the 1099 form. This applies whether you are working as an individual or through a business entity such as an LLC or partnership.

The 1099 form for contractors reports income earned from non-employee compensation, such as freelance projects, contract work, or rent received for property owned. This form lists what you were paid by the client for the prior tax year. 

Typically, your client will send you Form 1099 from a client in January—the beginning of tax season. At the same time, they will send a copy to the IRS, which will use it to see how much money they’ve made during the year. 

Then, the IRS will check it against the income tax filings to make sure you aren’t underreporting. They want to be certain you are paying taxes on everything you have earned and not hiding any income from them.

In addition to non-employee compensation, there are other situations where the 1099 form may be necessary. So, you must keep track of all your sources of income throughout the year so that you can accurately determine if you meet the threshold for using the 1099 form.

1099-NEC vs. 1099-MISC

One of the biggest questions businesses face regarding the 1099 form is which tax form to use. There are 17 types of 1099 tax forms, but if you’re an independent contractor, the two most common forms used are 1099-NEC and 1099-MISC.

NEC stands for Nonemployee Compensation, and it refers specifically to payments made to independent contractors for their services. These payments must be reported on Form 1099-NEC and submitted to the IRS. 

On the other hand, Form 1099-MISC is used for a wider range of income reporting purposes, including rents, royalties, prizes/awards, and more. Only certain types of income on this form would apply to independent contractors.

So, how do you know which form to use? If you hired someone as an independent contractor and paid them $600 or more in nonemployee compensation during the year, then you should use Form 1099-NEC. 

On the other hand, if you hired an individual or business entity (such as a law firm) that provided different types of services not explicitly related to nonemployee compensation (i.e., rent), then you would report those payments using Form 1099-MISC.

• At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest

• At least $600 in rent, prizes, other income payments, payments to an attorney and more.

• Report direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.

It’s important to note that misrepresentation of information in these forms can result in penalties from the IRS. So, if there’s any confusion about which form to use when reporting income paid to a contractor, it’s always best to consult with a tax professional or accountant.

Key Differences Between W-9 and 1099 Forms

One of the main differences between these forms is who fills them out. Employers need to ensure that they have collected a completed W-9 from their contractors before any work commences.

So, employers don’t fill out the W-9 form themselves; instead, they send it to their contractors, who fill it out and then send it back to the employer. However, it is the responsibility of the employer to send a complete 1099 form to both the contractor and the IRS.

Employers do not control whether their independent contractors choose to fill out a W-9—it is solely up to the contractor’s decision. However, employers are required by law to send 1099s if they pay any contractor $600 or more within a given year. 

Form W-9	Form 1099
Used by the employer to collect the contractor’s tax information	Used by the employer to report the total amount they’ve paid an independent contractor over a year
Only submitted again if the contractor’s information changes	Submitted annually when the client has paid the contractor>$600 in a year
The contractor fills it out	The client fills it out
The client sends a blank copy to the contractor, who then fills it out and returns it to the client	The client sends one filled-out copy to the contractor and one to the IRS
Sent to the contractor before they begin working for a client	Sent to contractor and IRS before the end of January

Form 1099 and W-9 Tax Deadlines

The tax deadline for filing Form 1099 and obtaining W-9 forms from contractors can vary depending on the type of business and its fiscal year. Generally, companies are required to file Form 1099 by January 31st, following the end of the previous tax year. 

For example, if your employer operates on a calendar year (January-December), they will need to submit Form 1099 by January 31st of the following year. They are also required to provide copies of this form to you and the IRS by this date as well. 

Contractors who receive a Form 1099 from a business they worked with during the tax year must ensure that all information reported is correct. However, they generally have until April 15th (the standard personal income tax deadline)to pay their taxes. 

Contrary to popular belief, there is no tax deadline for Form W-9. Clients must get filled-out W-9s from their contractors before the end of the tax year so they can file their taxes and send them their Form 1099s.

While clients are required to have a contractor fill out a Form W-9 before they pay them, they can also get it filled out by their contractors before the end of the tax year so they can file their taxes and send them their Form 1099s.

However, not everyone follows these rules though. Since most businesses scramble to complete their taxes on time, don’t be surprised to receive a W-9 near the end of the tax year.

Tips for Handling W-9 and 1099 Forms

Whether you are a contractor or a business owner hiring independent contractors, managing these tax forms can be overwhelming and confusing for the first time. However, you can download a copy of Forms W-9 and 1099 at the IRS website to get the full rundown.

The W-9 form is simple and straightforward. You only need to fill out your registered business; otherwise, you can just fill out the top line and leave this one blank. 

In the next section, tick what type of entity you operate as and whether your limited liability company (LLC) files taxes as a C corporation, S corporation, or Partnership.  

In Part I, you must provide your Taxpayer Identification Number (TIN), which can be an Employer Identification Number (EIN) or a Social Security Number (SSN).

On the other hand, most Form 1099 forms will be filled in when you receive them from a client, including your business name, address, the TIN they entered on Form W-9 and other information.

You can submit these forms electronically without having to print them out physically. Both the W-9 and 1099 forms can be completed and submitted online using e-signatures, making it more convenient for both parties.

If you are unsure about how to fill out these forms, seek the assistance of a tax professional to save you time and stress. They can also help ensure that all necessary information is accurately reported to avoid any potential issues with the IRS.

doola’s Tip: If you are a contractor, make sure you receive a Form W-9 from your client. Since it has your Social Security Number (SSN) and other critical information, sending it to a stranger could lead to fraud.

How doola can Help

Whether you are a contractor or an employer, you are already juggling multiple projects and responsibilities. On top of that, managing these forms can often become overwhelming and confusing, leading to potential errors and issues come tax season.

doola’s tax filing services cater specifically to the unique needs of contractors who lack the resources to manage this on their own. Our expertise allows us to identify applicable forms for your specific situation and handle them on your behalf.

Since having clear, accurate, and up-to-date books ensures seamless tax filing, our bookkeeping solution is tailored to contractors’ unique record-keeping requirements.

It tracks and categorizes all your financial transactions across all verticals, such as receipts, invoices, and bank statements, into well-maintained books so that when tax season arrives, everything is organized seamlessly.

With doola, you can stay focused on growing your business while leaving the tedious task of tax filing and bookkeeping to us.