The Internal Revenue Service loves to have you fill out forms because the more you complete, the more opportunities the IRS has to get money from you. The W-9 Form, titled “Request for Taxpayer Identification Number and Certification” is one little jewel you need to become acquainted with due to the recent adoption into law of the Affordable Care Act. In Section 9006: Expansion of Information Reporting Requirements, the following changes to Section 6041 of the 1986 Internal Tax Code are:
(a) IN GENERAL—Section 6041 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsections:(h) APPLICATION TO CORPORATIONS—Notwithstanding any regulation prescribed by the Secretary before the date of the enactment of this subsection, for purposes of this section the term ‘person’ includes any corporation that is not an organization exempt from tax under section 501(a).
(i) R EGULATIONS—The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purposes of this section, including rules to prevent duplicative reporting of transactions.
(b) PAYMENTS FOR PROPERTY AND OTHER GROSS PROCEEDS— Subsection (a) of section 6041 of the Internal Revenue Code of 1986 is amended — (1) by inserting amounts in consideration for property, after wages, (2) by inserting gross proceeds, after emoluments, or other, and (3) by inserting gross proceeds, after setting forth the amount of such.
What does all that mean? It means if you or a corporation hires anyone or entity for contract work (i.e.: freelance writer, laborer, sub-contractor), you will need to have them complete a W-9 Form so you will have their taxpayer information on hand should you need to complete a 1099 Form for payment of services of non-employed individuals or companies. A W-9 Form needs to be requested of and completed by anyone who engaged in contract work-for-hire for you. The minimum amount that you must report is $600.00. Meaning if you pay someone from $0.01 up to $599.99 total within the calendar year, you do not need to report it. However, when you hit the $600.00 mark in payments total, you will have to report it the following year by completing and sending in a 1099 Form to the IRS.
Prior to the signing into law of the Affordable Care Act, there were several provisions and exemptions for both individuals and corporations with regard to the W-9 Form and 1099. Now, effective December 31, 2010, there are relatively few exemptions so anyone who is being paid more than $600.00 and is not an employee is being requested by the Payor to complete a W-9 Form for tax reporting purposes. This includes bartering as well.
As far as the 1099 Form goes, there are 15 different types:
- 1099-A : Acquisition or abandonment of a secure estate
- 1099-B : Transactions between a broker and barter exchange
- 1099-C : Cancelled debts
- 1099-CAP : Change in organizational control and capital structure
- 1099-DIV : Dividends and other distributions of an organization
- 1099-G : Transactions between governments
- 1099-H : Health Insurance future payments
- 1099-INT : Interest on income
- 1099-LTC : Long term benefits
- 1099-MISC : Miscellaneous income through any other source
- 1099-OID : Discount on the original income
- 1099-PATR : Payments and distributions received from cooperatives or partners
- 1099-Q : Payment made for education such as school fees or college funds
- 1099-R : Transactions from pensions, retirement plans, or insurance plans
- 1099-S : Transactions relating to real estate
The reason for this change is simple. Track the previously unknown payments that have alluded the IRS for years. The Federal Government is now in charge of Health Care for everyone and the strong arm is the IRS. By expanding the reach of who must report non-employee payments, the tax base is expanded exponentially. Now, you need a W-9 from the handy-helper, painter or even the kid who mows your lawn every other week. And, if you pay them more than $600.00 in a calendar year, you will need to complete a 1099 Form and send it in to the IRS along with a copy to the person or entity you are reporting on.
If you need help filing your taxes this year, you may want to consider both Turbo Tax and H&R Block. Their free online tax software can make your tax nightmares disappear.
Published or updated November 23, 2010.
{ 7 comments… read them below or add one }
If you don’t know what a W9 form is, I would definitely recommend that you call the IRS immediately
I have a question. If I was a candidate appearing at an interview wherein I had to fly in, do I need to fill in W-9 for my expenses to be reimbursed by the hiring company? Lets say the amount is a about $605.00
Thanks in advance!
Sar
A w-9 is needed only if income is received by you. So this transaction would not qualify no matter the amount of the expense.
The business you are seeking the reimbursement from should include that reimbursement as a business expense, however there are no additional forms you need to file. Providing the business a receipt is all that is required on your part and you will not be eligible to claim this as a business expense of your own.
if i field a w-9 at the beginning of the year and i made 15000 what percent of taxes do i have to pay at the end of the year
Hi,
I freelanced for a company in 2010. I did a sample for them and got paid only $25. I didn’t get anymore work from them again all year. But at the end of the year, their finance person emailed me and said that I still needed to file a W-9.
$25? According to this article, I don’t have to file anything. Could you point me to the right IRS guideline that says I don’t have to do it? Much much appreciate it!
Paula
Hi Paula
Generally, companies require W-9′s be filled out prior to employment, so situations like this don’t happen. That said, since you only made $25, they are not required (but can choose to do so) to submit a 1099 on your behalf to the IRS, so you can consider this case officially closed. If you want karma points, you can ease the companies headache just a smidge and provide the W-9.
Remember though, you will still have to report that income on your 2010 tax return. As an independent contractor, it matters not how much you made from each job, rather from your profession as a whole. There are no limitations to reporting income like there are for businesses.
Schedule SE will need to be filed along with your tax return this year.
I own a photography company. It is a sole proprietorship. I shoot and prvie the clients with photos on a cd or dvd. Payments are made to my company and not me personally. I shot for musicians and also do building shots for the real estate industry. Where does this leave me??