Anyone who does work for a company but was not the actual employee of that company is required to fill out Form W-9 for every company for which they performed non-employee work. Form W-9 is known as “information reporting” federal income tax forms. Form W-9 is used in the U.S. when working as a freelancer or independent contractor. The company then uses the information you provide on the form to prepare Form 1099-MISC, reporting to the Internal Revenue Service the amount of income it paid to you or your company.

Who might be asked to fill out a Form W-9? Freelancers, for one. Freelancers are brought in to perform work on projects that are short-term. This involves work such as writing, research, or graphic design work. They aren’t needed full time, as the work will run out. Freelancers are required to fill out a W-9 form.

According to the IRS or Internal Revenue Service, you are eligible for a 1099-MISC when you work as an independent contractor and perform services for a company rather than being a direct employee. Generally, as an independent contractor, you have the right to control what you work on and how it will be done. Your client can only “control or direct only the result of the work.”

Here are some examples that may be considered independent contractors:

If you have not collected a W-9 form from your contractor/vendor and did not issue the required 1099-Misc form, the IRS will hold you responsible for not withholding 24% tax on the amount paid and assess penalties for not issuing the required form. The penalties are $270 for each failure to file and an additional $270 for each failure to issue a required 1099 Form. The IRS is very serious about 1099’s being filed and in addition to the potential penalties for not filing, they can/will deny the deduction for that expense under audit. It is strongly recommended that you request a W-9 from all vendors you do business. This will allow you to accurately generate the required 1099’s and if you are ever audited, you can produce the W-9’s and show that you are in compliance.

The 1099-MISC form is used for businesses to report payments of $10 or more in gross royalties or $600 or more in compensations or rents to a person who is not an employee.

The 1099-K form is used by individuals to report payments of $600 or more annually in compensation of goods and services, via a third-party network.

Disclaimer: These FAQ’s do not constitute legal or tax advice. Tax laws and regulations change frequently, and their application can vary widely based on the specific facts and circumstances involved. You are responsible for consulting with your own professional tax advisors concerning specific tax circumstances.