IRS forms W-9 vs 1099: 5 key differences & uses

As a business owner or HR professional, you're no stranger to the alphabet soup of tax forms. From W-2s and W-4s to I-9s and 1095-Cs, it can quickly become overwhelming. 

Among this sea of paperwork, the W-9 and 1099 forms stand out as particularly crucial for anyone working with independent contractors or self-employed individuals. Because in today's gig economy, chances are you're working with more contractors than ever before.

Mishandling these forms can lead to costly penalties, not to mention some very unhappy contractors. So it's critical to know the difference between a W-9 and 1099, when to use each one, and how to stay on the right side of the IRS. This piece throws more light on the subject.

What is a W-9 form?

The W-9, or "Request for Taxpayer Identification Number and Certification," is an IRS form used to gather key pieces of information from independent contractors and other payees.

When your business hires a new contractor, you'll typically request a W-9 from them before they start work. The contractor fills out the form with their name, business name, address, and taxpayer identification number (TIN), which is either their social security number (SSN) or employer identification number (EIN).

As the business, you'll keep the completed W-9 on file for your records. You don't actually submit it to the IRS. Rather, it's used to populate the 1099 forms you'll file at year-end (assuming you paid the contractor $600 or more).

A common misconception is that a W-9 is only needed for independent contractors. But the form is actually used for a variety of payee types, including:

• Freelancers and consultants
• Vendors and suppliers
• Attorneys and law firms
• Landlords and property managers
• Nonprofits and tax-exempt organizations

Basically, anytime you're paying someone who's not a full-time employee, there's a good chance you'll need to collect a W-9 from them.

What is a 1099 form?

The 1099 is a family of IRS forms used to report various types of income other than regular wages, salaries, and tips (which are reported on a W-2). There are many different 1099 forms, each with their own specific purpose and filing requirements.

Two of the most common for businesses are the 1099-NEC and 1099-MISC:

• 1099-NEC: Used to report non-employee compensation of $600 or more paid to independent contractors, freelancers, and other service providers. This used to be reported in Box 7 of the 1099-MISC, but now has its own dedicated form.

• 1099-MISC: Used to report other types of miscellaneous income, like rent payments, royalties, prize money, and medical/healthcare payments. If you paid a contractor at least $600 in the tax year, you'll report those payments in Box 3.

As a business, you're responsible for filling out and filing the appropriate 1099 forms for your payees each year. You'll need to send a copy to both the contractor and the IRS, typically by January 31.

Other common types of 1099 forms include:

• 1099-INT: Used by banks and financial institutions to report interest income of $10 or more.

• 1099-DIV: Used by companies to report dividend income of $10 or more to shareholders.

• 1099-R: Used by retirement plan administrators to report distributions from pensions, annuities, retirement plans, and IRAs.

• 1099-K: Used by third-party payment processors (like PayPal and Venmo) to report payments for goods and services.

The specific 1099 forms a business needs to file will depend on the types of payments they made throughout the year. But for most companies working with independent contractors, the 1099-NEC and/or 1099-MISC will be the main ones to know.

5 key differences between W-9 and 1099 forms

While the W-9 and 1099 are connected, they serve very different purposes. Here are some of the key distinctions to keep in mind:

The W-9 is like an introduction form. When a contractor or freelancer fills this out for you, they're essentially saying, "Hey there, this is my official tax identity!" They provide their name, address, and taxpayer ID number before you start working together. You simply keep this form in your records as proof that you did your due diligence.

The 1099 is more like a year-end report card. After you've paid that contractor $600+ during the tax year, you create this form that says, "Here's exactly how much we paid this person!" You send one copy to the IRS so they know what to expect on the contractor's tax return, and another copy to the contractor so they know what to report.

Think of it as a simple sequence: The W-9 collects all the identifying information at the beginning that you'll need to create an accurate 1099 at the end. They're two pieces of the same puzzle—one doesn't work properly without the other.

This side-by-side comparison highlights just how much of the form burden falls on your business. You're responsible for knowing which payees need a W-9, collecting those forms in a timely manner, using that info to prepare the right 1099s, and making sure everything gets filed on time.

When to use W-9 and 1099 forms

Now that we've covered the basics of each form, let's look at some real-world scenarios where you'll need to put them into action.

Requesting and collecting W-9 forms

Your business will need to obtain a completed W-9 form anytime you:

• Hire a new contractor, consultant, or freelancer
• Start working with a new vendor or supplier
• Pay rent to a new landlord or property manager
• Make royalty payments of $10 or more
• Award a cash prize of $600 or more
• Make any other payment that may be reportable on a 1099 form

Ideally, you should collect the W-9 before the payee begins work or before you issue them payment. That way, you'll have their information on file when it comes time to prepare their 1099s. 

Preparing and filing 1099 forms

Your 1099 filing requirements will depend on the types of payments you made throughout the year. But in general, businesses must issue 1099 forms to individuals and unincorporated entities they've paid $600 or more during the tax year for services, rent, prizes, awards, or other income not processed through credit card payments.

To prepare the 1099s, you'll need the payee's name, address, and TIN (SSN/EIN) from their W-9 form, as well as the total amount you paid them during the year. You'll then report this information on the appropriate 1099 form(s) and send copies to the payee and the IRS.

The filing deadline is typically January 31 for both paper and electronic 1099s. But it's a good idea to get a head start on the process, especially if you have a lot of forms to prepare. Many payroll and accounting software platforms have built-in 1099 filing features that can help automate the process.

6 tax considerations for W9 and 1099 forms

Collecting W-9s and filing 1099s may seem like just another administrative task. But these forms actually play a critical role in your business's tax compliance. Here are some key things to keep in mind:

Backup withholding tax

If a payee fails to provide their taxpayer identification number on a W-9 (or provides an incorrect one), you may be required to withhold 24% of their payments and remit it to the IRS. This is known as backup withholding. To avoid this, make sure you're collecting W-9s upfront and double-checking the information for accuracy. If a payee is subject to backup withholding, they'll need to contact the IRS directly to resolve the issue.

State filing requirements

In addition to the federal 1099 filings, you may also have state-level requirements to contend with. Many states require businesses to file 1099s with their tax department, often with earlier deadlines than the IRS. Make sure you understand the specific rules for each state where you do business. Failure to comply could result in fines and penalties at the state level.

Independent contractor classification

The W-9 and 1099 forms are specifically for independent contractors, not employees. It's critical as an employer to make sure you're classifying your workers correctly. Misclassifying an employee as a contractor (and vice versa) can lead to serious tax consequences, including back taxes, penalties, and even legal action. If you're unsure about a worker's status, consult with a tax professional or use the IRS's "common law rules" to make the determination.

International payees

If you're working with contractors or vendors outside the U.S., you may need to use a different form to collect their information. The W-8 series of forms (like the W-8BEN and W-8BEN-E) are used for foreign payees who are claiming a reduced rate of withholding under a tax treaty. As with the W-9, you'll collect the W-8 upfront and use it to prepare any necessary 1099s or 1042-S forms at year-end. But the rules around withholding and reporting for international payees can be complex, so it's best to consult with a tax advisor.

Self-employment tax obligations

Unlike employees, self-employed contractors are responsible for paying both the employer and employee portions of Social Security and Medicare taxes. These individuals will use the information from their 1099 forms when preparing their tax return to calculate their self-employment tax obligations. As the paying business, you're not responsible for withholding these taxes, but you must accurately report payments so contractors can fulfill their employment tax requirements.

Record retention

Finally, it's important to keep good records of all your W-9s and 1099s, even after you've filed them with the IRS. The general rule of thumb is to retain these forms for at least three years from the due date of the return or the date you filed it, whichever is later. Having a clear record retention policy will help you stay organized and prepared in the event of an audit or other inquiry from the IRS. Many businesses store these forms electronically in their accounting or payroll software for easy access.

Potential W-9 and 1099 penalties

So what happens if you don't collect a W-9 or file a 1099 when you're supposed to? The short answer is: nothing good. The IRS can impose significant penalties for non-compliance with 1099 filing requirements:

• Failure to file a correct 1099 on time: $60-$330 per form (for 2024), depending on how late the filing is
• Failure to furnish a correct 1099 to the payee: $60-$330 per form (for 2024), depending on how late
• Intentional disregard of filing requirements: $660 per form (for 2024), with no maximum penalty cap

Maximum penalty limits apply based on business size, except in cases of intentional disregard.

4 tips for handling W-9 and 1099 forms

With so much at stake, it's important to get W-9 and 1099 compliance right. Here are a few best practices to keep in mind:

Establish a W-9 collection process

Don't wait until year-end to track down missing W-9s from your contractors. Make collecting the form part of your standard onboarding process for all new payees. Many businesses include a blank W-9 with their initial contract or service agreement and require the form to be completed before any work begins or payments are made.

Verify W-9 information before filing 1099s

Once you have a completed W-9 from a payee, take a moment to double-check that all the information is accurate and complete. Pay special attention to the name and TIN fields, as these are the most common sources of errors on 1099s. If something doesn't look right, follow up with the payee to get clarification.

Choose the right 1099 form(s)

There are many different 1099 forms, each with their own specific purpose and filing requirements. Make sure you're using the right form for each type of payment you made throughout the year. For example, the 1099-NEC is specifically for non-employee compensation paid to independent contractors, while the 1099-MISC is for other types of miscellaneous income like rent or royalty payments.

Take advantage of e-filing for 1099s

If you have more than 250 1099 forms to file, you're required to do so electronically. But even if you have fewer forms, e-filing can still save you time and reduce the risk of errors. Many payroll and accounting software platforms have built-in 1099 e-filing features that can streamline the process. 

Streamlined payroll, tax, and compliance management with Rippling

Managing W-9s, 1099s, and other tax forms can be a huge headache for busy HR and finance teams. But it doesn't have to be. With Rippling's all-in-one workforce management platform, you can automate and streamline your contractor compliance from start to finish.

Here's how it works:

• Automatically collect W-9s from new contractors during onboarding
• Track payments to contractors throughout the year
• Generate and e-file 1099s with the click of a button at year-end
• Keep all your W-9s and 1099s organized in one central location
• Get real-time alerts for missing or expired forms
• Rest easy knowing you're always in compliance with the latest tax laws and regulations

Plus, with Rippling's advanced reporting and analytics, you can get instant visibility into your contractor spend, headcount, and more. No more chasing down data from multiple systems or spreadsheets. 

Ready to take the hassle out of contractor compliance? Request a demo of Rippling today to see how easy W-9 and 1099 management can be.

1099 vs W9 FAQs

Is a W-9 the same as a 1099?

No, a W-9 is not the same as a 1099. These are  two different forms with distinct purposes. A W-9 is used to collect a contractor's tax information before work begins, while a 1099 is used to report their income to the IRS at year-end.

Who is required to fill out a W-9?

Any payee who will receive $600 or more in compensation from your business during the tax year should fill out a W-9 form. This includes self-employed individuals, independent contractors, freelancers, sole proprietors, vendors, and other non-employees.

Is an I-9 form the same as a 1099 form?

No, an I-9 form is not at all the same as a 1099 form. . An I-9 is a form used to verify an employee's eligibility to work in the U.S., while a 1099 is used to report income paid to non-employees like contractors and freelancers. 

Do I pay more taxes with a W-9?

No, a W-9 is just an informational form used to collect a payee's tax ID and certification. You do not pay more taxes with a W-9. It doesn't impact the amount of taxes owed. Unlike employees who have income tax withholding from each paycheck, contractors typically don't face tax withholding. However, if a payee fails to provide a W-9 when requested, the payer may be required to withhold 24% of their payments for federal income tax as backup withholding.

This blog is based on information available to Rippling as of March 18, 2025.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.