Which nuances freelancers should take into account in order to fill in the form W-9 correctly

Freelancers don’t not need to register specifically, so they should be registered as an ordinary taxpayer citizen. Charges will be paid according to the appropriate scheme 4 times a year and a contribution return once a year.

The rate will be about 28%. A license towards the type of activity described is not required. By the way they will be able to hire employees. The next step may be LLC (limited liability company), it must be registered.

Objective reasons why freelancers need to fill out W-9 form

You work for yourself – you get a piecework salary. But it does not absolve you from paying social template contributions known as self-employment rate. Once you have earned after deducting all the costs of $ 400 (towards church workers – $ 108.28), you must start paying regular payments to Social Security and Medicare funds, and you need to do this until your profit reaches $ 118,500 in the case of Social Security (the sum is current as of 2019).

Payments to the Medicare fund do not depend on revenue. That’s why you need to write in the printable W-9 form carefully. Fill Annex 2 to the blank, get the sum of taxable profit (line 31 in the application) and multiply this result by 92.35%. If the result is $ 400 ($ 108.28) or less, you do not have to pay contribution. If the editable sum exceeds $ 400 ($ 108.28), then you are a taxpayer.

For example, you earned on sales in Etsy $ 550 after deducting all expenses. Having multiplied this amount by 92.35%, we get $ 508 – means you have to pay rate on self-employed. The government fills this charge with two major federal funds, of which various benefits and assistance are provided towards the:

  • elderly;
  • victims of various disasters;
  • people with disabilities.

People who receive a salary also pay this rate, better known as payroll taxes – it is deducted from every salary payment until the amount of revenue reaches $ 118,500.

Correctly filled form W-9 – as a social security

Each time you transfer a rate, the sum of payments is displayed in your individual profile in the Social Security Administration, and you have points. However, the legislator takes into account the fact that in the case of labor relations 50% of payroll taxes are paid at the expense of the employer, so entrepreneurs are provided with a special procedure for deducting such part from taxable income. In practice, it looks like the following: you determine the amount of your charge in the SE application, and then 50% of that amount is indicated in line 27 of your blank, which really reduces your taxable income, which is indicated in line 38.

For example, your taxable business income is $ 40,000. Next, calculate the income for self-employment tax purposes: $ 36,940 ($ 40,000 x 92.35%), and now determine the self-employed tax: $ 5,652 ($ 36,940 x 15.3% ). Now determine the amount that will reduce your taxable annual income: $ 2,826 ($ 5,652 x 50%). Accordingly, the work of a freelancer is only an imaginary freedom from taxation, and the introduction of correct data into the W-9 form is primarily a benefit towards the freelancers themselves.