Monumentous is the word I chose to describe the burden of regulation and compliance to small business owners must follow. For fellow wordsmithers, know that monumentous means something that is large in both task and life! This blog outlines W-9 forms with a taster portion of W-2 and 1040 forms.
What is a W-9?
Anytime you engage in a business relationship with an independent contractor (gig worker, freelance vendor or me!) you must generate a W-9. Why? Because they are not employees AND these vendors are responsible for paying income, Medicare, social security and other state and/or local taxes. Not all businesses will have an EIN Number. A sole proprietorship or LLC with zero employees can use their social security UNLESS you file any of these type tax returns: Employment, Exicse, Alcohol, Tobacco and Firearms.
Your bookkeeper audit your records and ensure there are W-9’s on file for anyone you engage in a business relationship with an independent contractor.
An accounting colleague, Jackie Shaw, who runs Go! Get Organized in Corvallis, OR happens to be a QuickBooks guru and a ethical…“fixer”, says you should request the W-9 form from as applicable as soon as you set up the account in your payment software. Don’t wait until you reach the $600 mark or to issue a 1099 form. Many complex rules related to foreign status and partnerships. The IRS imposes a $50 fine per form fine. An incomplete or inaccurate form can result in withholding problems related to a partner’s allocable share of partnership.
Contact your accounting person or Jackie (Keep in mind all accounting pros are knee deep in tax season.).
Ask your payroll folks to ensure they are using the new W-2 form because of 2021 tax changes, court decisions and treasury regulations. If you don’t file on time and correctly, hefty fines may be imposed that can devastate a small business.