questions about 1099 and w9?
questions about 1099 and w9?
OK my hubby owns his own business, first year! now i know he has to 10-99 his workers but do they have to fill out a w9 also? see this is how it works, he is a sub contractor (works solely for one contractor, and has two emloyees, now what?
Answers:
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bostonianinmo: He needs to get a W-9 from his subs BEFORE he pays them anything! If they refuse to provide their TIN (usually their SSN) then he MUST withhold taxes at 28% from all funds paid to them and hand that over to the IRS. He must prepare a Form 1099 for each sub that he paid $600 or more in any tax year. He may prepare them for subs that he paid less than $600 to if he wishies. The IRS copies of the 1099s are submitted to the IRS accompanied by a Form 1096 transmittal document. You can order the forms from the IRS or purchase them from local office supply stores. You cannot use the downloadable sample forms from the IRS website, however. Many business software packages can also generate 1099s and 1096s and print the information on pre-printed forms for you. WARNING! While your husband may or may not be an IC himself, it's highly likely that the people who work for him are legally classified as employees! In this case the Form 1099 filings are irrelevant, he MUST withhold taxes from their wages, pay payroll taxes himself, and provide them with a Form W-2 at the end of the year. He should file a Form SS-8 with the IRS to get a formal ruling on their (and his!) status. (He should have done this BEFORE he started paying anyone.) If he improperly classifies them as ICs the IRS will come down very hard on him indeed, possibly hard enough to throw the business into bankruptcy; I've seen it happen a number of times. Given that anyone can file an SS-8 and request a determination, including the people who work for him, he really needs to do this immediately and if necessary, prepare for the financial impact if the IRS rules them to be employees.
2008-01-21 06:12:18
bostonianinmo: He needs to get a W-9 from his subs BEFORE he pays them anything! If they refuse to provide their TIN (usually their SSN) then he MUST withhold taxes at 28% from all funds paid to them and hand that over to the IRS. He must prepare a Form 1099 for each sub that he paid $600 or more in any tax year. He may prepare them for subs that he paid less than $600 to if he wishies. The IRS copies of the 1099s are submitted to the IRS accompanied by a Form 1096 transmittal document. You can order the forms from the IRS or purchase them from local office supply stores. You cannot use the downloadable sample forms from the IRS website, however. Many business software packages can also generate 1099s and 1096s and print the information on pre-printed forms for you. WARNING! While your husband may or may not be an IC himself, it's highly likely that the people who work for him are legally classified as employees! In this case the Form 1099 filings are irrelevant, he MUST withhold taxes from their wages, pay payroll taxes himself, and provide them with a Form W-2 at the end of the year. He should file a Form SS-8 with the IRS to get a formal ruling on their (and his!) status. (He should have done this BEFORE he started paying anyone.) If he improperly classifies them as ICs the IRS will come down very hard on him indeed, possibly hard enough to throw the business into bankruptcy; I've seen it happen a number of times. Given that anyone can file an SS-8 and request a determination, including the people who work for him, he really needs to do this immediately and if necessary, prepare for the financial impact if the IRS rules them to be employees.
2008-01-21 06:12:18