Subcontractors, W9s and 1099s

It can be a little confusing to understand Subcontractors, W9s and 1099s so here is some help.

Why are W9s and 1099s so important? Here are 5 reasons why you should get a W9 and issue a 1099 to anyone who provides services to your business at any time. 

  1. It’s the law. I recommend getting one from every contractor before you issue them payment. If you don’t happen to pay them more than $600 in the calendar year, no big deal. You just won’t issue them a 1099. However, going back after the fact can cause headaches and issues if they refuse to provide it.
  2. You can be fined if you fail to issue a 1099 to a contractor.
  3. It is your responsibility as a business owner/manager to have a signed, legible copy of Form W9 on hand for every person, business or entity that it issues a check to. This includes individuals, sole proprietors and limited liability companies. You do not have to issue a 1099 to a corporation, but you should request a W9 from them so you have proof that they told you they were incorporated. 
  4. You run the risk that the IRS will not allow deductions of actual business expenses because you did not issue a W9. Therefore, that becomes taxable income to your business.
  5. There is no reason not to acquire this form when you have good business processes in place. I recommend to all my clients to request the form before you ever issue a payment…nothing gets the contractor more motivated than payment to provide you the required legal form. If they won’t provide you a W9, you simply shouldn’t do business with them or issue any payments until you have it.

Here is the most recent form as of the time of this blog: W9 form

1099s should be postmarked no later than Jan 31 of the following year to avoid penalties. Any questions, please feel free to reach out to me.