It's that time of year, end of the year, when you notice the things that you haven't kept up with, or didn't know you needed to be doing all year-long...so it goes.
Things that haven't been addressed completely, procedures not quite in place, are suddenly visible, requiring attention, decisions and resolution. That's just something that happens in December, I think. The year's coming to an end, and we'd like things organized and put to bed, so we can start fresh—ready for the new year.
The question of who should fill out a W9 is one of those things lately—especially with clients who have storefront businesses...cash registers.
I think having a cash business makes it harder to maintain formality in financial matters. Cash just feels more casual than a check. So, when you pay the guy who did some work for you around the store, you give him a few bucks out of the register, not noticing that he didn't give you an invoice, much less his W9 form.
I get that.
Also, true for start-ups, new businesses, who might be handwriting checks, rather than having their accounting department issue them, who may be doing business with associates who are friends first, providing a service second...the routine formalities won't feel like they apply.
But they do.
You're a business. You have to account for everything your business does financially; all expenditures go on your books—even if they're in cash, or small or to individuals who aren't part of an established a company (there really is no such thing as off the books), and at tax time, they will be reported as expenses by you, and as income by the providers.
So, the W9 form—who should fill it out?
How about everyone?
To keep it simple, don't distinguish between paying an individual for their services, freelancer, sole proprietor, LLC or a corporation. If you're paying a vendor, get a W9 from them.
Scratch that -- if you're going to pay a vendor: get the W9 form first! That way, you'll have what you need on file when it comes time to issue 1099-MISC forms. Regardless of whether you'll be issuing one to this particular vendor, friend or company...just have everyone fill out a W9 form.
What are they?—W9 forms
The W9 is short form that you can download here. They identify individuals and companies—their names, addresses and either social security # or business Tax ID #. That's it.
And, the 1099-MISC?
They're like the W2 you issue to your employees — they declare the amount of income a vendor received from you in a year. No taxes will have been taken out, as they would in the case of your employees. That'll be up to the vendor to pay any income tax owed when s/he files her personal or company tax return.
So, for employees, when you hire them, they fill out a W4 to give you the info needed for their W2, and for other people your business pays, they fill out a W9.
Here are a couple of links to what the IRS has to say about W9s and 1099-MISC income