August 23, 2022

Independent Contractor Checklist: Form W-9, Classification and Agreement.

We are almost over the hump for tax year 2022. We have a little more than 5 months left in this calendar year, so it is a great opportunity to review and prepare for the year end. This will hopefully smooth out the issuances of 1099-NEC, 1099 -MISC, and 1099-K in January 2023.

Lets begin with the basics.

Form W-9 and Employers Identification Number(EIN)

What is Form W-9? It is an informational form to provide your correct Taxpayer Identification Number to the person that will renumerate the gig worker, remote independent contractor worker or any independent locum tenens healthcare provider such as a Certified Nurse Anesthetist (CRNA).

What is Form W-9? It is an informational form to provide your correct Taxpayer Identification Number to the person that will renumerate the gig worker, remote independent contractor worker or any independent locum tenens healthcare provider such as a Certified Nurse Anesthetist (CRNA).

Filing out the Form W-9 is quite simple.   

Box 1. Name of the company or individual;

Box 2 Name of Business if not same as Box 1;

Box 3 Classification of federal tax classification, 

Sole Proprietor( SMLLC), Corporation C- or S, Partnership or Trust /Estate

LLC – that is treated as Corporation C or S or Partnership

Box Exemptions only for certain entities- 

Box 5  Address 

Box 6 City, State & Zip Code

Filing out the Form W-9 is quite simple.    Box 1. Name of the company or individual; Box 2 Name of Business if not same as Box 1; Box 3 Classification of federal tax classification,  Sole Proprietor( SMLLC), Corporation C- or S, Partnership or Trust /Estate LLC – that is treated as Corporation C or S or Partnership Box Exemptions only for certain entities-  Box 5  Address  Box 6 City, State & Zip Code

PART I The Taxpayer Identification Number.   I suggest that all business should use a Employer Identification Number “EIN” so that personal social security numbers lessen the opportunity to be abused or subject to identity theft.

PART I The Taxpayer Identification Number.   I suggest that all business should use a Employer Identification Number “EIN” so that personal social security numbers lessen the opportunity to be abused or subject to identity theft.

Part II The Certification

This should be sent with every client that you do work for and for every independent contractor that you employ.  As a reminder, I tell you do not submit their payment unless you have their Form W-9.

This should be sent with every client that you do work for and for every independent contractor that you employ.  As a reminder, I tell you do not submit their payment unless you have their Form W-9.

Independent Contractor vs Employee.

Per the IRS, an independent contractor is a independent trade, business or profession that offer their services to the general public. The independent contractor controls the what and how it is done. An employee is all actions are controlled by the employer.

Per the IRS, an independent contractor is a independent trade, business or profession that offer their services to the general public. The independent contractor controls the what and how it is done. An employee is all actions are controlled by the employer.

What does the IRS look at to determine the difference between and independent contractor vs employee?  There are three (3) major defining areas.

What does the IRS look at to determine the difference between and independent contractor vs employee?  There are three (3) major defining areas.

  • Behavior Control Independent Contractor vs Employee

When and where they want When and Where Directed

  • Financial Control Invoice by their Deliverables Set Time and date- Payllroll
  • Relationship Specialized function- No benefits all Functions-benefit

May work with many companies Usually 1

Have own tools Provided tools

Behavior Control Independent Contractor vs Employee When and where they want When and Where Directed Financial Control Invoice by their Deliverables Set Time and date- Payllroll Relationship Specialized function- No benefits all Functions-benefit May work with many companies Usually 1 Have own tools Provided tools

What does the IRS look at to determine the difference between and independent contractor vs employee?  There are three (3) major defining areas.

Contractor Agreement

It is important to classify and communicate the scope of the work as an independent contractor. You need to protect both you and your client.  The independent contractor agreement is a formal contract that provide the terms of the services provided, length, deliverables and payment of those services.  In New York State, the “Freelance Isn’t Free Act “ has protected the independent contractor.  All Independent Contractors should consider having an agreement to prevent abuses in other states and localities.   Freelances Union is a great resource for creating the Freelance Contract https://www.freelancersunion.org/resources/contract-creator/

It is important to classify and communicate the scope of the work as an independent contractor. You need to protect both you and your client.  The independent contractor agreement is a formal contract that provide the terms of the services provided, length, deliverables and payment of those services.  In New York State, the “Freelance Isn’t Free Act “ has protected the independent contractor.  All Independent Contractors should consider having an agreement to prevent abuses in other states and localities.   Freelances Union is a great resource for creating the Freelance Contract https://www.freelancersunion.org/resources/contract-creator/

1099 Accountant LLC is an online bookkeeping, online accounting and online tax services. Our dedicated bookkeepers, accountants and CPA’s work tirelessly to provide the most comprehensive all inclusive holistic services for the “gig’ economy, freelancers, independent contractors, self employed and one person business today.   Sign up for a Free Consultation today.  https://1099accountant.com/contact/

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