Independent contractors are people who have performed work for a company without actually being hired by that company. They can be writers, or repairpeople, or any number of other types of workers. These contractors don’t fill out the usual W-4 tax forms when starting a new job with a company. Instead, they fill out W-9 tax forms.
What Is It?
W-9 tax forms are for independent contractors. They are used by businesses to retrieve info about the contractor. This includes the person’s name, address, and Social Security Number. They fill out different federal income tax forms as they are taxed differently. Thus, they can’t use only the usual 1040 federal income tax forms. They also need to fill out a Schedule C at the end of the year.
The W-9 is used by the business that hired the contractor to verify their information. For one, it protects the business as they have the person’s info. If something goes wrong, they can’t just slip away!
The W-9 tax forms are also used by the business when it comes to tax season. They will issue out the federal income tax forms 1099-MISC. This form reports how much money was issued out to contractors. The contractor then uses this form to fill out their taxes.
What About a W-4?
Not filling out a W-4 is one of the requirements for being a contractor with a company. If you work for a business and don’t fill out the W-4 federal income tax forms and other paperwork, you’re a contractor when it comes to the IRS. Employees fill out W-4 tax forms. Contractors do not.
This is important because contractors, but not employees, must pay the self-employment tax. It covers Social Security and Medicare. This tax isn’t for all wages earned. It’s for all money earned after business expenses are taken out. This can result in a lower tax liability for contractors.