When you earn money as a freelancer and are not employed anywhere by contract, taxes still appear in your life. As soon as you get paid by some company more than $600 in a calendar year, it is illegal to go past unnoticeable, so you as a contractor have to fill out a specially designed tax information form called W-9 to announce earnings to the IRS.
A W-9 serves as an intermediate paper on the way to a bigger report paper 1099-MISC that accumulates information on all external workforce employment throughout the year. Businesses collect W-9s from independent service vendors to show turnovers outside officially hired workers. You work with W-9 blanks to claim income likewise. This nominal procedure comes to alleviate tax-related woes and make sure everyone obeys the law.
An employee or a contractor?
There are different definitions when tax matters appear, but the most essential ones here are contractors and employers. An independent contractor, i.e. a worker who is paid without any employment contract, is not a formal employee even if they might provide services for the same organization for long years. The point is employees are not obliged to fill out a current form at all because they are classified under other category. Contractors, instead, are not listed in any companies in an official way, so to remain in the spotlight of taxes they get controlled by this procedure. In addition, independent service providers have no connection to issues like health insurance and backup withholding which is why there is another form to claim money turnover.
Another key difference is that employees cannot control the way they perform required duties – household helpers, for example, as babysitters despite being outside workers are actually regarded to be employees and therefor should be taxed accordingly. The reason is babysitters work set hours and perform work in a manner his or her employer prescribes. Independent contractors, in turn, decide themselves how, when and where – they are given just the target to take on. Thus, all freelancing parties fall under a W-9 while actual employees process through a separate tax system.
What do I do?
So, you are considered a contractor and an organization wants you to fill out this blank. Firstly, go to the IRS site where you will find a 2019 printable W-9 and download the form itself. Then carefully fill in all the details needed and hand it over to the company you freelance for. If you aim at providing freelance services in the future, always keep a blank close at hand because anytime your job is done your figurative boss may be asking for these official matters.