Independent contractors

As an independent contractor, you’re required to pay taxes on the income you earn and you must file a tax return with the IRS each year. Your employer will not retain money for taxes, in the same way, they would for permanent employees, so you’re responsible for doing the accounting yourself. To do that, you’ll need a 1099 form from each company that you’ve completed contract work. To ensure that you receive your 1099s in time for tax season, you’ll need to submit a completed W-9 tax form to each company prior to working on projects for them. This guarantees that they have all of the information they need to file their taxes with the IRS, and to generate and send your 1099 for your personal income tax return. Form W-9 will need information such as the contractor’s full name, the business’ name, what kind of business it is, and the tax identification number/Social Security number (depending on whether the contractor is a business or a sole proprietor). You will also need to include information about your ‘backup withholding’ status. It’s unlikely you’ll be subject to backup withholding, however, if you are the contractee then you will need to withhold tax from your pay. This is typically a fixed rate of 24% for the 2018 to 2025 tax years.

Employers

If you manage payroll or taxes for a company, it’s important that you keep a completed W-9 on file for each active working employee and contractor. You’ll use W-9 tax forms to set up payroll for employees and to create W-2s and 1099 forms for every employee and contractor during the federal tax season every year.

You may be sent a W-9 by your employer, otherwise, you can easily access an up to date copy via the IRS website (irs.gov). IRS form W-9 is a four-page document, but all fillable fields are on the first page. In the top section, the employee or contractor should write or type their personal information, including their name, business name (if applicable), address, and tax classification:

• Individual
• C Corporation
• S Corporation,
• Limited Liability Company (LLC)
• Corporation
• trust/estate, or other.

In the second section, the individual filling out the W-9 tax form must add their Social Security or employer identification number (EIN). The W-9 needs a signature and date in the final section. Once the form is complete, send it back to the person or company who requested it, at which point it needs to be completed entirely. You’ll need a new W-9 form if any of your relevant information has changed since your last form was submitted. This could include information like your Social Security number, tax identification number, name, business name, address, or anything else on the form. Make sure that you definitely need to fill out a W-9, not any other kind of tax document. For example, permanent and full-time employees generally need form W-4, not a W-9. This is used to help employers determine the amount of money to withhold for the taxman, and is not suited for freelancers.