What Is Form W-9?

Form W-9, officially titled the “Request for Taxpayer Identification Number and Certification,” is a document used in the United States by businesses and individuals who are required to file information returns with the Internal Revenue Service (IRS). It is used to collect the taxpayer identification number (TIN) of a U.S. person (or entity) who is being paid income that is subject to backup withholding. The form includes the requester’s name, the taxpayer’s name, address, and TIN, as well as certifications regarding the accuracy of the information provided.

What Is Form 1099?

Form 1099 is a series of documents used to report various types of income other than salaries, wages, and tips to the IRS. There are several variations of Form 1099, each corresponding to different types of income. For example, Form 1099-INT is used to report interest income, Form 1099-DIV is used to report dividends, and Form 1099-MISC is used to report miscellaneous income. These forms are provided to taxpayers by payers of income, and they must also be sent to the IRS to report income earned by individuals and businesses.

Key Differences Between 1099 and W9

• Purpose: Form W-9 is used to collect the taxpayer identification number (TIN) from a person or entity who will receive income subject to backup withholding. Form 1099, on the other hand, is used by payers to report various types of income paid to taxpayers to the IRS.
• Direction of Information: W-9 is filled out by the recipient of the income, while Form 1099 is filled out by the payer of the income.
• Timing: W-9 is typically completed before any payments are made, while Form 1099 is filled out and submitted after income has been paid to the recipient.
• Content: W-9 includes personal information of the taxpayer, such as name, address, and TIN, whereas Form 1099 includes details about the income paid, such as the amount and type of income.

How to Use W-9 and 1099 Forms Together

A common scenario where Form W-9 and Form 1099 are used together occurs in business relationships where a company or individual is engaging the services of an independent contractor or freelancer. Here’s how the process typically unfolds:

Requesting Information (Form W-9)

The payer (the company or individual engaging the services) requests the independent contractor or freelancer to fill out a Form W-9. This form collects essential taxpayer information, such as the contractor’s name, address, and taxpayer identification number (TIN), usually a Social Security Number (SSN) or Employer Identification Number (EIN).

Engagement and Payment

The independent contractor or freelancer provides the completed Form W-9 to the payer.

The payer engages the services of the contractor or freelancer and pays them for their work.

Reporting Income (Form 1099)

At the end of the tax year, typically by January 31st of the following year, the payer uses the information collected on the Form W-9 to prepare and issue a Form 1099 to the independent contractor or freelancer.

The Form 1099 reports the total amount of income paid to the contractor or freelancer during the tax year, along with other relevant details, such as the type of income (e.g., non-employee compensation on Form 1099-NEC).

Tax Reporting

The independent contractor or freelancer receives the Form 1099 from the payer and uses it to report their income on their tax return.

The payer also submits a copy of the Form 1099 to the IRS for tax reporting purposes.

One example where this process is commonly observed is in the relationship between a company and a freelance graphic designer. The company hires the freelance designer to create marketing materials, and before payment is made, the company requests the designer to fill out a Form W-9 to gather necessary taxpayer information. After completing the project and paying the designer, the company then prepares and issues a Form 1099 to report the total amount paid to the designer for their services during the tax year.