W-9s: Why They're a Must-Have for Your Small Business

As a small business owner, you likely work with a variety of freelancers, independent contractors, or vendors who aren't your full-time employees. You pay them for their services, but when it comes to tax time, how do you report those payments to the IRS?

The answer is the W-9 form.

A W-9 is a simple but essential document. It's an official request for your vendor's Taxpayer Identification Number (TIN)—which could be their Social Security number (SSN) or Employer Identification Number (EIN). You also get their name, address, and business type. Also be sure to request their email address so that you can E-file 1099 forms with the IRS and State Agencies.

Here's why it's so important to get a W-9 from every contractor you pay over $600 in a calendar year:

• It's the Law: The IRS requires you to file a Form 1099-NEC (Nonemployee Compensation) for any contractor you've paid $600 or more in a year. You can't fill out a 1099 without the information you get from a W-9.

• Avoid Penalties: If you fail to file a required 1099, the IRS can hit you with a penalty. And if you have to file a 1099 but can't because you don't have the contractor's info, you could face penalties for each missing or incorrect form.

• Stay Organized: Collecting W-9s at the beginning of a working relationship—rather than scrambling at the end of the year—makes your tax season much smoother. It's a simple step that saves a lot of headaches later on.

The best practice is to request a completed W-9 form from a contractor before you make their first payment. It's a professional and standard part of doing business, and it protects both you and your business when tax time rolls around.

If I can be of any help, please reach out to me at; mdaviscpb@qbocleanups.com