What Is the Difference Between the W-9 & the 1099-MISC?

The Internal Revenue Service Form W-9 is often confused with Form 1099-MISC. Serving two separate -- but related -- purposes, business owners use Form W-9, Request for Taxpayer Identification Number and Certification, to obtain tax identification information from their independent contractors. Business owners use Form 1099-MISC, Miscellaneous Income, to report income paid to other business owners and independent contractors. Thus, businesses use Form W-9 as the basis for reporting their qualified 1099-MISC to individuals who completed Form W-9.

Overview

Although business owners, self-employed taxpayers and independent contractors are required to submit their 1099-MISC forms to their payees and to the IRS, they are not required to submit their W-9 forms to the IRS. Businesses use W-9 forms to collect tax information about independent contractors and contractors they hire to provide services for them. Similar to tax forms that employers require their employees to complete, the W-9 form verifies that an individual is a United States taxpayer. Business owners and independent contractors use W-9 to obtain tax identification information for payees and to establish whether they are subject to backup withholding taxes for delinquent tax debts.

Completing W-9 and 1099-MISC Forms

Taxpayers who are required to complete IRS Form W-9 include those who are required to report their payments. This includes taxpayers who are required to submit 1099-MISC forms. Taxpayers are responsible for completing and submitting 1099-MISC forms for each individual if they paid him at least $600 during the tax year, and they incurred their expenses as part of their business activities. Thus, companies who hire independent contractors typically require them to complete W-9 forms, even if they do not pay them more than $600 during the tax year, to ease their administrative burdens.

1099-MISC Reporting Requirements

Independent contractors receive 1099-MISC forms from their clients if they receive more than $600 per year from each of them. Businesses are required to submit their 1099 forms only if they paid their contractors for services incurred during their business activities. The IRS requires independent contractors to pay self-employment taxes, since their clients are not required to withhold their employment taxes.

Penalties

The IRS can impose a $50 penalty against taxpayers who fail to provide businesses with their taxpayer identification or Social Security numbers. Furthermore, failing to provide truthful information is punishable by a criminal fine or imprisonment. The IRS can impose criminal penalties against taxpayers who falsify backup withholding information. Additionally, the IRS imposes penalties against businesses that fail to report or submit their 1099 forms by their filing deadlines.

References

• IRS.gov: Form W-9, Request for Taxpayer Identification Number and Certification
• IRS.gov: Instructions for the Requester of Form W-9
• IRS.gov: 2011 Instructions for Form 1099-MISC
• IRS.gov: Publication 334 (2010), Tax Guide for Small Business
• IRS.gov: General Instructions for Certain Information Returns

Resources

• IRS.gov: Small Business and Self-Employed Tax Center