Human Resources

When should I ask a subcontractor for a W-9?

I’m trying to figure out the scenarios in which I am required to submit a W-9 for a subcontractor. I know the $600 rule for any subcontractor in a given year for services, but what if they’re registered as a corporation? What if I buy >$5,000 in material from the local hardware store in a calendar year. What if I pay all of my subcontractors via e-payment (Paypal, credit/debit, Bitcoin, etc.)?

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  1. 74 Answers

    Hi, W9 completion is for service providers. While the requirement is for fees paid over $600 and corporations are excluded bet practices is to require all service vendors to provide a W9. If you require this from the start this will save time in the long run from having to hunt the information down at the end of the year. Usually, when you contract with a vendor even if they are not required to receive the 1099 there is still pertinent information such as legal name and address that you can obtain from the W9. When you contract with a service provider instead of asking them if they are a corporation, LLC, Partnership etc you should require all of them to complete a W9 before the 1st payment is received. Again, better safe to have the information from the start then to hunt it down when are you trying to prepare 1099’s and up against the IRS deadline.

    Now how you pay the employees does affect if you provide them with a 1099. If you are not paying the vendors directly meaning using Paypal for example, a third-party payment processor then PayPal is the one who will provide the vendor with the 1099. Bitcoin payment also goes through a third-party payment system and that system such as coinbase will send the vendor a 1099 directly. So if you would like a rule of thumb, if the funds leave your bank account and go directly to the service provider then you are the one responsible for providing the 1099 for those payments. Hope this clears things up for you.

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