1099 Forms vs W-9 Forms
Whether you’re a freelancer reveling in the freedom of gig work, a small business owner juggling multiple hats, or just someone trying to make sense of tax season, understanding 1099 Forms vs W-9 Forms is crucial. In our article, we want to break down the key differences.
1099 Forms
1099 forms are used to report various types of income other than wages, salaries, and tips (which are reported on W-2 forms). This includes income such as freelance earnings, interest, dividends, and other types of non-employment income.
Types
There are several types of 1099 forms, each for different types of income. For instance:
- 1099-MISC: For miscellaneous income.
- 1099-INT: For interest income.
- 1099-DIV: For dividends and distributions.
- 1099-NEC: For non-employee compensation (common for freelancers or independent contractors).
Who Files
The entity or person making the payment (such as a client or financial institution) is responsible for filing the appropriate 1099 form with the IRS and providing a copy to the recipient of the income.
Thresholds
Generally, a 1099 form is required if the amount paid during the year reaches a specific threshold, which varies depending on the type of payment.
W-9 Forms
Form W-9, “Request for Taxpayer Identification Number and Certification,” is used to provide the correct taxpayer identification number (TIN) to entities that pay you income. It’s a way of informing payers how to report the income they pay you to the IRS.
Usage
When you start working as a freelancer, independent contractor, or any role that doesn’t qualify as traditional employment, the client or company will often ask you to complete a W-9 form. This form is used to gather information such as your name, address, and Social Security Number (SSN) or Employer Identification Number (EIN).
Connection to 1099
The information from the W-9 is used by the payer to fill out a 1099 form, if necessary, for reporting the payments made to you to the IRS.
Confidentiality
As the W-9 contains sensitive information, it’s important to ensure it’s only provided to legitimate and trusted entities.
Key Differences
W-9 is for collecting taxpayer information by the payer, while 1099 is for reporting income paid to the IRS.
The recipient of income fills out the W-9 and gives it to the payer; the payer files the 1099 with the IRS and provides a copy to the recipient.
W-9 is not directly tied to a specific type of income, while 1099 forms are categorized by the type of income being reported.
Understanding these forms is crucial, especially for freelancers, independent contractors, and small business owners.
Next Steps
Do you need help with your 1099 Forms or other accounting needs? Schedule a consultation today to get started.
Related Posts on Redmond Accounting CA
-
New changes in 1099-K you need to knowNew changes in 1099-K you need to know Does your business accept payments via credit or debit cards? If you have accepted credit card payments online, you may have to report these payments from credit card or third-party processors on a Form 1099-K What is the Form 1099-K? A 1099-K is a tax form that should be filed with individual…
-
Business Financial Software Vs Personal Financial SoftwareBusiness Financial Software Vs Personal Financial Software On the surface, the question of business financial software vs personal financial software may seem self-explanatory. However, there are some businesses that are using personal financial software for their business needs. The team at Redmond Accounting does not recommend that. At all. We’re here to shed some insight on the business financial software…
-
Controller vs. Comptroller - Key DifferencesController vs. Comptroller - Key Differences In the accounting world, controller vs. comptroller has a contentious history. The two words have a similar definition which begs the question: is there really a need for both? As with all intellectual discussions, it’s best to examine historical facts first. Keep reading as we dive into the great accounting debate of controller vs.…
-
QuickBooks vs Other Cloud Based Accounting AppsQuickBooks vs Other Cloud Based Accounting Apps With virtual software becoming more popular every day, there are many types of services available for all aspects of your business. When it comes to accounting for a small business, how do you know which accounting software is right for you? QuickBooks is known as the leader in the Accounting Software industry. QuickBooks…
-
Expensify Vs Concur — Which Is Better For Your Business?Expensify Vs Concur — Which Is Better For Your Business? Keeping your expenses organized is a tedious and time-consuming practice, which is exactly why investing in an app that can do all this for you is such a practical decision. There are a few available apps you choose from, but which one should you choose? Let us break down the…
-
Virtual Controller Vs. In-House Controller: Main DifferencesVirtual Controller Vs. In-House Controller: Main Differences Congratulations! Your business is growing, and you’re reaching your goals! Uh-oh, we know that face. It’s the look of overwhelmed and stress that every business owner gets when their financials and accounting become too much to handle on their own. Guess what? THAT’S OKAY! No one ever said owning and running a business…
-
Gusto vs. Zenefits: Which Is Better For Businesses?Gusto vs. Zenefits: Which Is Better For Businesses? So your business is growing, and you are able to hire employees to continue building and scaling. Congratulations! Growing a business from the ground up is exciting but overwhelming when you consider all of the moving parts of running a business every day. As a small business owner, you’re probably doing most…
-
Gusto vs ADP to Power Your Business's PayrollGusto vs ADP to Power Your Business's Payroll Businesses with employees need a payroll platform to ensure that their employees are paid and receive the benefits that they deserve. Gusto vs ADP will be an inevitable comparison that you’ll need to make at some point. Both solutions can help you satisfy payroll, but they have key differences that can make…
-
Cloud Accounting VS Traditional Accounting -Which is Better?Cloud Accounting VS Traditional Accounting -Which is Better? In Thomas Friedman’s book, The World is Flat, he discusses how the world, even though it is vast and spread throughout the globe, is becoming more connected every day with the use of technology. Technology is one of the major causes of “flattening” the world. As a result, the normal way of…
