Hiring independent contractors can be a smart way to scale your business operations as they can more easily provide the specific skill sets you need for a particular time. However, you must classify your independent contractors correctly and follow all tax compliance when paying your contractors.
There are many factors to consider and questions to ask. How do you pay your independent contractors? What forms do independent contractors fill out so they can be paid correctly? And what are the differences between all the forms?
Below we discuss how to ensure appropriate classification and form completion so you can compliantly hire and pay your independent contractors.
Who is an independent contractor?
An independent contractor, or freelancer, is a self-employed individual who provides specific goods or services to companies. Often, these may be in the form of projects with arrangements that both parties have discussed and agreed upon.
Independent contractors are usually responsible for sending invoices to their clients to get paid for their work. To ensure correct and timely payments, contractors must complete specific tax forms that allow for expenses and deductions that abide by all tax regulations.
Work with a partner like Skuad to easily classify and pay your independent contractors. Independent contractors are sometimes called 1099 employees because they must complete the 1099 tax form. Further, we help you answer, “What form do 1099 employees fill out?”
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How to classify your independent contractors correctly for tax purposes
Independent contractors who want to work and get paid in the U.S. must be classified correctly for tax purposes. To do so, contractors must provide a Tax Identification Number (TIN) to the IRS and the government for tax purposes. The TIN is a way for the government to identify taxpayers and track their tax payments.
For individuals who are U.S. citizens, their Social Security Number (SSN) usually serves as their TIN. Non-U.S. citizens who do not have an SSN but still have tax obligations can apply for an Individual Taxpayer Identification Number (ITIN) or an Employer Identification Number (EIN).
Learn More: What is Tax Identification Number (TIN)?
Contact Skuad experts to file taxes compliantly today. In the next section, we will help you better understand what forms do independent contractors fill out.
What forms do independent contractors fill out for tax purposes?
Independent contractors and employees complete different forms for hiring and payments. Businesses must also complete different forms based on the worker’s classification. So what forms do independent contractors fill out?
IRS Tax form 1099-NEC
Businesses use a 1099-NEC form to report payments they made to independent contractors for services performed. Employers must file a 1099-NEC form if the payments are equal to or exceed $600 and are made to a non-employee for services rendered for the business. What tax form does an independent contractor use to file their annual taxes? Independent contractors can use the information on the 1099-NEC form after receiving it from their clients.
IRS Tax form 1096
Businesses must include a 1096 form if they file their taxes by mail. The 1096 form is a summary document that must accompany the following forms: 1097, 1098, 1099, 3921, 3922, 5498, and W-2G. You must complete a separate 1096 form for each type of return you submit. This form allows the IRS to quickly see the contents of your tax return so they can direct it to the correct departments.
IRS Tax Form W-9
The previous two forms were for employers to fill out. So what form does an independent contractor fill out?
A W-9 form is an IRS form that the employer gives to the independent contractor when they start officially working together. The independent contractor fills in their essential information, such as legal name, home address, and TIN. The form aims to identify contractors so employers can process their taxes correctly. The W-9 form provides employers with the necessary information to complete the 1099 form to file taxes.
Skuad takes care of employment taxes for you. When hiring remote workers across the United States, staying compliant with all tax regulations is critical. That means accurately calculating, withholding, and paying employee taxes.
Talk to our experts today so you can stop worrying about tax compliance and focus on your business endeavors.
What is the difference between W-9 and 1099 tax forms?
With so many different forms, what tax form do contractors fill out? Contractors are responsible for filling out a W-9 form, which provides information that employers need to file their taxes correctly. There is no deadline for when the form must be completed. The contractor needs to fill out the form only once and submit it to the employer.
On the other hand, employers are responsible for filling out a 1099 form, which reports the amount an employer paid the contractor. The deadline for completing this form is January 31st for the previous year. The employer must submit this form to the IRS annually while the contract is ongoing.
How Skuad can help
Our expert teams are experienced in managing payroll in compliance with country-specific employment laws and tax regulations. This article aims to answer the question, “What forms do independent contractors fill out?” Check out the various payment methods to ensure your independent contractors get paid for a comprehensive understanding of payroll management.
Skuad is a global employment platform that allows organizations to onboard and pay their remote employees in over 160 countries. Skuad handles your global workforce’s entire employment lifecycle so you can focus on scaling your business. With Skuad, know that you’re always in compliance with local laws. Talk to Skuad experts today to hire and pay independent contractors easily.
Frequently Asked Questions
Do independent contractors fill out W-4?
No. A company employee fills out a W-4 form so their employer can send them a W-2 form for tax filing purposes. An independent contractor fills out a W-9 form instead.
Do independent contractors get W-2 or 1099?
Independent contractors get Form 1099, which an employer uses to report how much they paid the contractor. On the other hand, company employees get a W-2 form at tax time.
Is 1099 the same as a W-9?
They are not the same. The employer contracting out projects must complete a 1099 form to report how much they paid the contractor. The independent contractor must complete a W-9 to provide the information needed to receive payments.