1099 NEC Form Importance of W-9 Form: Are you reporting non-employee compensation to the IRS? Then file 1099 NEC Form with the IRS and to the recipient before the due date. Have you entered the recipient information correctly? Otherwise you can request the payee to file W-9 Form to avoid errors when filing 1099 NEC Form.
Doesn’t know about W-9 Form? Don’t worry! We are here to let you know about main use of W-9 Form to file 1099 NEC, when to use wW-9 Form to file 1099 NEC and where the payee reports the payments regarding non-employee compensation.
What is the main use of W-9 Form to file 1099 NEC?
In the present scenario, we can observe numerous persons filing W-9 Form. If a person is filing out W-9 Form, then he/she is considered as a non-employee. The non-employee file a W-9 Form when he received compensation of about $600 or more on course of business or trade in a tax year. The non-employee compensations are reported through 1099 NEC Form respectively.
The main use of W-9 Form to file 1099 NEC Form is to reduce backup withholding taxes. As we know a payee is requested to file W-9 Form to provide details which includes TIN of the payee. With the information provided through W-9 Form, the payer can fill out details of the payee without any errors.
What is a W-9 Form?
The other name for W-9 Form is “Request for Taxpayer Identification Number and Certification Form”. A W-9 Form is an IRS tax form used to confirm a person’s name, address and Taxpayer Identification Number for generating individual Income. The information provided through W-9 Form is used to generate a 1099 tax form for filing income tax returns.
If a person or an entity collects information on W-9 form, then the provided information through W-9 Form cannot be used for any other purpose. This is strictly restricted under privacy regulations.
For example: If you’re paying a non-employee of about $600 during a tax year, then the compensation paid is reported through 1099 NEC Form. You must request the payee to fill out W-9 Form for generating the income paid to the person through 1099 NEC form.
Who is require file W-9 Form?
Most of the payee’s who receive non-employee compensation confuse about W-4 Form and W-9 Form. A non-employee who receives compensation from an individual or an entity are requested to file W-9 Form. W-9 Form act as a formal written request for information purpose only and used for confirming a person’s Taxpayer Identification Number.
W-9 Form is different from a W-4 form. The major difference is W-4 Form is filed by the employee’s directly to the employer and a W-9 Form is filed by the payee to the individual person or an entity. IRS W-4 Form is a employee’s withholding certificate.
For example: If you are working for a business as an employee, then you’re required to fill out W-4 Form to the employer whom you are working under. If the business recruits a freelancer and pay him annually for performing services as non-employee, then the freelancer requires to fill out W-9 Form to the payer to file 1099 Form Online NEC.
When to use W9 Form for 1099 NEC Tax Form?
W-9 Form is used to fill out 1099 NEC Tax Form. W-9 Form provides details of the payee to whom the non-employee compensation was paid during the tax year. 1099 NEC Tax Form requires payee details which includes name of the payee, address and TIN. This can be obtained to the taxpayer by requesting the payee to fill out W-9 Form. The payee needs to provide correct details through W-9 Form. With the help of the information provided through W-9 Form. The taxpayer can fill out 1099 NEC Form without any mistakes. Payee must provide a valid TIN otherwise 1099 NEC Form may fall under backup withholding taxes. The TIN of the payee includes EIN or SSN.
Advantage of W9 Form for filing 1099 NEC Tax Form
The following are the advantages of filing W-9 Form for 1099 NEC Tax Form:
Easy to fill 1099 NEC Form
If the payee provides W-9 Form, then the taxpayer fills out the payee information in 1099 NEC Form easily without any mistakes.
If the payer requests the payee to fill out W-9 Form, then the information provided through W-9 Form is used when filing 1099 NEC Tax Form. This made the taxpayer free from error filing. As W-9 Form provides details of the payee, which helps the taxpayer in filling out 1099 NEC Tax Form conveniently.
Avoids backup withholding taxes
If the payee provides correct TIN through W-9 Form, then the taxpayer doesn’t require to withhold federal or state taxes. Backup withholding of taxes is due to incorrect TIN of the payee. If you enter a valid TIN, then your 1099 NEC Form is free from backup withholding taxes.
Where the payee reports 1099 NEC payments received?
If you receive more than $600 for performing work as a non-employee during the calendar year, then you’ll receive a 1099 NEC Tax Form. After receiving check whether the non-employee compensation amount entered is correct or not. Because you’ll report the payments received through income tax return form to the IRS. IRS checks whether you’re reporting the compensation amount correct or not. If you report wrong details through income tax return form, then the IRS considers it as fraudulent activity and imposes heavy penalties.
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