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Both 1099s and W-9s are income tax-related forms that the IRS requires to be filled out. As with most things related to taxes and the IRS, exactly what each form does and why it needs to be completed and sent in aren’t always clear. Therefore, you may wonder: what exactly is the difference between a 1099 and a W-9? And why are they necessary?
Both of these forms are for contractors rather than regular employees, which means that the tax situation is different. The forms both relate to income tax, but they serve different purposes. 1099s are a yearly record of the compensation that a contractor receives from their client to show how much money you made so that you can pay your required taxes.
A W-9, on the other hand, is about identifying you as a contractor. Unlike regular employees, contractors are entirely responsible for their own taxes. That means that there isn’t a withholding form; instead, it’s all about identification.
This form isn’t usually sent to the IRS, as the company employing a contractor isn’t responsible for their income tax. Instead, it holds all the information necessary for them to issue you your 1099 so you can pay your taxes.
Key Takeaways:
| 1099 | W-9 |
|---|---|
| Miscellaneous income or nonemployee compensation. | Request for taxpayer identification number and certification. |
| A 1099 form is filled out by the client at the end of every year to show how much they paid the contractor. | A W-9 is filled out by the contractor, usually at the beginning of a job, so that the client knows what sort of business they run and what to put on their 1099. |
| 1099s are filled out and filed annually. | W-9s are used for corrective purposes and during onboarding (if it’s a long-term contract). Every person you do a job for should get on so that they can properly fill out your 1099 form. |
| 1099 forms are filed with your taxes, showing how much you made. Anyone who paid you more than $600 for a job should send you one at the end of the year. | W-9s are not sent to the IRS. They are a form to help contractors and those who work with contractors make sure all the tax information is correct on the 1099s. |
What Is a 1099?
There are actually two types of 1099s, 1099-MISC and 1099-NEC. The 1099-NEC is a newer form and is meant to be used for contractors. All contractor payments used to be reported on the 1099-MISC, but that’s no longer the case. The 1099-MISC form is now reserved for other types of income, such as rent payments, royalties, and medical payments.
Employers that work with contractors will fill out 1099s every year. Contractors should receive 1099 from every company that they contract with, so long as the payment is over $600. The forms are used for tax purposes as a way to keep track of how much you were paid and by whom. Many employers mail them, but there are also ways to send them digitally.
1099s are also the forms that are submitted to the IRS when filing taxes. Oftentimes, it’s only required to fill out certain information from them on the tax form itself – the form contains a fair amount of additional information that only relates to what the IRS requires from employers.
A 1099 form is broken down into boxes. Some are demarcated by letters, while others don’t have any particular identifier.
The 1099-MISC and 1099-NEC had different requirements to fill out. Both require:
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Personal information of the payer.
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Payer’s name
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Payer’s full address
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Payer’s telephone number.
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Payer’s Tax Identification Number (TIN).
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In addition, the contractor’s information is filled out on the form as the “recipient.” This requires their TIN, address, and account number. If you have a second TIN, such as a business or personal one, then you need to mark that as well.
For the NEC form, it’s expected that you’re getting paid for a job done rather than reporting other types of income. This means that they have to list how much they paid you during that year and whether any federal or state income tax was withheld. If so, they need to list the amounts that were withheld.
For MISC forms, there are a lot more choices. There are several types of income that are included on the form. You would only fill in the ones that are applicable to your circumstances.
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Box 1. This is to list payments received from rents, if applicable.
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Box 2. This is for any royalties received that year.
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Box 3. Other incomes are listed here.
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Box 4. If any federal income tax was withheld, the amount is listed here.
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Box 5. This box is to list any proceeds made from fishing boats.
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Box 6. If you received payments for healthcare or medical expenses, it goes in this box.
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Box 7. You check the box here if the payer made a direct sale of more than 5,000 dollars that is intended for resale.
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Box 8. This is if you received any payments in lieu of dividends or interest.
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Box 9. Proceeds from crop insurance should be enumerated here.
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Box 10. Gross proceeds paid to an attorney are counted on 1099 forms and should be put in this box.
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Box 11. Should you have purchased any fish for resale, the amount should be played here.
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Box 12. This is for section 409A deferrals. 409A deferrals are very broad but are payments that are meant to be paid at a later date, such as pension plans, severance packages, or stock options.
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Box 13. This box should be checked if it meets the Foreign Account Tax Compliance Act (FATCA) filing requirement. That means that if you have any foreign accounts or made money other than in the U.S., you have to check this box.
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Box 14. A section for excess golden parachute payments. While many consider all golden parachute payments to be “excess,” there are only certain requirements where it ends up on 1099.
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Box 15. This is for nonqualified deferred compensation.
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Box 16. This is for state taxes that may have been withheld.
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Box 17. Reserved in this space is the payer’s state number or the state’s number.
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Box 18. This is where you put your state income.
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What Is a W-9?
IRS Form W-9, a request for taxpayer identification number and certification, is a form that the contractor fills out, usually at the beginning of a job. Once filled out, the W-9 is submitted to the payer, who keeps it in their records.
It is recommended – even required – to send one to every person or company that you do a job for. This allows them to properly fill out the 1099s and send them to you so you can file your taxes.
The W-9 form itself is quite simple and short, though there are pages of instructions further down the document. A lot of it is going to be based on whether or not you have your own company and what type it is.
The first part of the document requires personal information, such as your name and the name of your business. From there, you must select what sort of company you run. It can be:
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Individual/sole proprietor or single-member LLC.
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C Corporation.
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S Corporation.
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Partnership.
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Trust/Estate
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Limited Liability company.
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Other.
All of these different types of businesses have different tax and other requirements which are beyond the scope of this article. Once you’ve done that, you also need to fill out your address, if you have exemption codes, and, potentially, the account numbers and/or the form requester’s name and address.
After that, there are two important parts.
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Part I. This is where you fill out your taxpayer identification number (TIN). Your TIN is how the IRS identifies you. If you’re a sole proprietor, then the number will be your social security number (SSN). If you have a larger company or a different type of corporation, then it will be assigned a TIN.
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Part II. Your signature. Of course, as with all official forms, this also certifies that the information you filled out was truthful and complete, to the best of your knowledge. It also states that you’re not subject to backup withholding, that you are a U.S. citizen, and that you’re compliant with FATCA.
1099 Vs. W-9 FAQ
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How do you get 1099 from the IRS?
It’s possible to request previously filed tax returns from the IRS, though it’s usually easier to request it from your employer.
If you wish to request it directly from the IRS, then you need to go to their website. Requesting your tax transcript from the IRS will allow you to get all the information. You can go to their tax record page by clicking here.
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Filing for 1099 with the IRS is typically done through tax filing software. Sites such as TurboTax and H&R Block will have all the information and forms needed to file your taxes, including your 1099. If you wish to, you can also go through an accounting firm or even submit it by mail.
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What’s the difference between a W-2 and a 1099?
A W-2 form is used for standard employment, while 1099 is a form that is used for contractors. Ostensibly, 1099 is for reporting miscellaneous income. It’s most often used for contractors. However, it’s also the form for landlords, as well as those who receive royalties, prizes, or other forms of income.
Paying a contractor doesn’t require you to withhold pay for taxes, so that’s something that the contractor must correct at the end of the year. Contractors usually don’t have additional benefits or deferred payments, either.
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Di has been a writer for more than half her life. Most of her writing so far has been fiction, and she’s gotten short stories published in online magazines Kzine and Silver Blade, as well as a flash fiction piece in the Bookends review. Di graduated from Mary Baldwin College (now University) with a degree in Psychology and Sociology.
