The W-9 Review

It is always a good idea to have each of your service subcontractors complete a W-9 Taxpayer Identification form as soon as you hire the subcontractor to commence any work for your business.

Similar to employees, it is required to report income paid to subcontractors to the IRS.

Here are some fields within the W-9 form to review to help ensure completeness for a later 1099 tax form:

  1. Name as shown on your income tax return.
    1. This should be the subcontractor’s legal filing name as per IRS records.
  2. Business name/disregarded entity name, if different from above.
    1. This can also be viewed as the “Doing Business As” trade name that the subcontractor is using in the course of their business with you, instead of their legal filing name.

Advice:

  • Be sure to review exactly what name is being used to pay your subcontractors.
  • In practice, unfortunately, subcontractors can mix up lines 1 and 2 above at times. One way to possibly spot this discrepancy is to look and see if either a personal social security number or a different business Employer Identification Number is reported on the W-9 (towards the bottom). If you are still unsure as to what name to report, then perhaps report BOTH names listed on lines 1 and 2 above, just to be sure nothing is left out.

 

  1. Check the appropriate box for federal tax classification…
    1. To keep it short here and in general practice: Any entity that is reported as any type of corporation or an LLC that enters the tax classification as a type of corporation, is NOT required to receive a 1099 from your business.
  2. Taxpayer Identification Number
    1. This information is very important and can be used in conjunction with the other information listed on the W-9 to determine if, for example, the subcontractor legal entity type is really just a sole proprietorship (Social Security Number) or a separate Limited Liability Company (Employer (or Tax) Identification Number).
    2. Both the Tax Identification Number and a Social Security Number are nine digits in length. So be sure to type these business number identifiers in their correct format into your 1099 software.

 

Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.

 

Share This Post: