W-9 Comes Before 1099-NEC
The first step to dealing with IRS Form 1099-NEC in your construction business is to collect and manage IRS Form W-9. By organizing the front end of the process, you eliminate much of the headache when it comes to the crunch time of filing the 1099-NEC tax reports. Collecting and managing W-9s from the onset of a working relationship with independent contractors is imperative.
Four W-9 Management Tips
Make a policy (document it) that a W-9 must be collected before an independent contractor is paid. Period.
Store all W-9s securely. Use the appropriate digital tools because you are storing sensitive personal information.
Verify the completeness of each W-9 collected. Include all required information in the proper allotted spaces.
Set a date for the annual “recollection” of all W-9s. Circumstances change, and verifiable, up-to-date information is vital.
1099-NEC a Step-by-Step Guide
Step 1: Open the W-9 File
Whether you’ve stored the W-9s in a drawer or digitally (the preferred method), ensure all the information is correct. Look for:
Name – full legal name that matches the name on their income tax return.
Business name – if different from the name listed above.
Type of entity – one of the following: individual/sole proprietorship or single-member LLC, C corporation, S corporation, partnership, trust/estate, limited liability company (LLC), or other.
Exempt status – this line is most commonly completed for specific businesses or entities and does not apply to individuals.
Mailing address – street address, city, state, and ZIP code.
Taxpayer identification number – for individuals or sole proprietors, this number is generally their Social Security number (SSN.) For other entities and businesses, it is their employer identification number (EIN.) For resident aliens it is a special individual taxpayer identification number (ITIN.)
Signature – signed by hand or via electronic signature and acknowledges that the signer has read and verified all items required by the government.
Step 2: Fill in Form 1099-NEC
Your business’s information will include:
Your business name
Street address
Telephone number
Taxpayer identification number
The payee’s identifying information will include:
The payee’s name
Mailing address
Taxpayer identification number (There’s also a box for an account number if you have multiple accounts for the payee.)
The amount of non-employee compensation paid during the tax year
Federal income tax withheld – usually zero unless you are required to follow backup withholding rules for the worker.
State-specific information – such as any state income tax withheld, the worker’s state identification number, and the amount of non-employee compensation applicable to that state.
Step 3: File Copy A with the IRS
Send Copy A to the IRS by the designated deadline, which this year is January 31, 2025
Step 4: Provide Copy B to the Recipient
Give Copy B to the recipient by the specified deadline, January 31, 2025.
Step 5: Retain Copy C for Your Records
It is crucial to keep Copy C for your records. It is used for tax documentation and will be required if there are IRS inquiries or audits.
1099-NEC Reporting Simplified
The team at The Profit Constructors is well-versed in dealing with all the nuances, weird circumstances, and slight differences within the construction industry concerning 1099-NEC filing. One of our services includes helping clients collect W-9s all year and then filing the 1099-NEC forms. Making this IRS publication understandable is part of how we help our clients Run With the Big Dogs!
Ambitious Construction Contractors look to The Profit Constructors to provide advocacy in dealing with:
Clients and customers
Employees and subcontractors
Vendors and service providers
Governmental entities
Working with The Profit Constructors gives Construction Contractors the means to organize their operations in ways that help them:
Remain informed
Avoid hassles
Reduce risks
Be future-ready
Ready for action? Or want to know more? Get in touch today to schedule a complimentary discovery call. 866-629-7735
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