What are a W-9 Form and a 1099 Form?

With so many rules, forms and considerations, tax season can be very complicated for many Americans. Taxes can be exceptionally difficult for independent contractors who don't already have taxes taken out and typically receive W-9 and 1099 forms. Although there is a correlation between these forms, understanding the purpose and details of the W-9 and 1099 forms is necessary to avoid trouble with the IRS when documenting and filing taxes.

The W-9 Form

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The purpose of the W-9 form is simply to formally request a taxpayer identification number (TIN). W-9s are commonly provided to independent contractors by a company or organization so that it can properly document payments made. It is the responsibility of the payee to provide the correct TIN number, which in most cases in the same as his social security number, and deliver the form to the payer, not the IRS. The W-9 is also used to state whether or not the payer is exempt from backup withholding, which typically occurs with payments related to interest, dividends, broker transactions, royalties and others.

The 1099 Form

A 1099 is a form that states the exact dollar amount that a company or organization paid to independent contractor or temporary employee. These are prepared by the payer and sent to the IRS as well as the contracted worker no later than January 31 after the tax year being filed. Workers and their employers only have to report amounts of $600 or more in wages for the tax year. In the case that money is withheld for tax purposes, it is reported on the 1099 as well. The 1099 form is sent to the IRS by the independent contractor as part of a tax return.

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Types of 1099s

Taxpayers use the 1099-MISC (miscellaneous) form to report payments for services provided, royalties and winnings, income from the sale of fish caught by fishing boat crew members and other sources, but the IRS provides a total of 17 1099 forms for a variety of income situations. Those who acquire or abandon property file a 1099-A while people who earn money from securities, commodities and barter exchange transactions use 1099-B. The IRS also provides a specific form for income from interest, the 1099-INT, and retired Americans that receive distributions from their IRAs file with the 1099-R. There is even a 1099-G form for people that receive unemployment compensation, tax refunds and taxable grants.

Connection between W-9 and 1099

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A 1099 cannot be filed for an independent contractor without a valid taxpayer identification number. Therefore a W-9 must be completed; typically at the time a contractor is hired and before any payments are made. Both forms are only valid for United States citizens and resident aliens, partnerships, corporations, companies and associations created or run in the U.S.