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Updated 6/4/2024

Contractors

Understanding W9 and W4 Forms for Hiring Contractors

What is a W9 Form?

A W9 form is used to request the name and taxpayer identification number (either SSN or EIN) of a payee (individual or business). Our finance department uses this form to produce 1099s in January, which are sent to each contractor and vendor for their tax reporting purposes. The 1099 form reports the total amount paid to the contractor or vendor during the calendar year. Unlike W2 employees, contractors and vendors must report all 1099 income as it is not taxed by YPR. W2 income is taxed upon payment, but W9 income requires the contractor or vendor to handle their own tax payments. The IRS receives a report from YPR on payments over $600, enabling verification of taxable income. YPR can face penalties for failing to accurately report to the IRS.

Differences Between W4s and W9s

  • W2 Form: Completed by employees, taxes are deducted with each paycheck. In January, employees receive a W2 showing total income and taxes deducted throughout the year.
  • W9 Form: Used by contractors or vendors. Taxes are not deducted by the payer, and the recipient is responsible for reporting and paying their own taxes.

When to Collect a W9

It’s best to collect a W9 form from contractors or vendors, regardless of the payment amount, to ensure compliance and avoid potential issues. Here are some examples:

  1. Example 1: Jenna Lee is organizing events in October and November, hiring the same yoga instructor for both. The first event costs $500, and the second costs $200. Jenna collects a W9 from the instructor before making any payments.

  2. Example 2: For an upcoming event, Jenna hires a consultant for $1,500. She ensures the consultant completes a W9 before payment.

  3. Example 3: Jenna hires a consultant for $400. Even if she may not use their services again, she collects a W9 upfront. If she hires them again for another $400 event, she can promptly pay because she already has the W9 on file. If not, nothing is reported to the IRS.

Sample Language for Requesting a W9

When you need to request a W9, email the contractor using the template language below, attach a blank W9 (link below), and cc Jenna Lee Kedrie. 

To Whom It May Concern,

You are receiving this request because we have provided payment to you or your company during this year.

The IRS requires us to report certain types of payments, so we ask that you fill out the attached W9 and return it to us by [X date] to remit your payment for services. Please help us remain in good standing with the IRS by supplying the requested information promptly.

Please remember: IRS code 6109 requires that you furnish this information upon request. If you do not supply this information, we will report the payments made to you with “Refused to Provide” in place of your EIN or Social Security number, which may subject you to IRS fines and penalties.

If you have any questions, please email Jenna Lee Kedrie at Jenna.Kedrie@youngpeopleinrecovery.org or call 720-498-6215.

Young People in Recovery thanks you in advance.