Tax season is upon us, and as an interior design business owner, it can be overwhelming to think about the complications of various reporting requirements. But the truth is that once you define your terms and understand what you’re dealing with, tax season isn’t nearly as scary as it might seem at first glance.
W9 and 1099 forms are some of those “they feel really scary until you understand it” tax forms. So let’s demystify the process and learn why you’re fully capable of understanding this part of your business’s annual tax reporting!
What is a W9?
A W9 is simply the form you collect from a subcontractor or business that is providing a service to your company. In other words, if you’re paying a painter, carpenter, or freelance designer to work with you, that’s who you request a W9 from.
You may have heard in the past that you don’t have to collect a W9 form until you’ve paid the individual/business over $600 – but that actually isn’t true! Any payment to an outside, nonemployee merits the need for a W9.
The best piece of advice we have about W9 forms is to make sure you actually get them. The foolproof way to do this is to require that their W9 be completed before they receive their first payment from you.
Related questions:
What if I didn’t ask for W9s on the front end and now I need them?
Make a list and follow up with everyone. Be sure you tell your interior design bookkeeper or accountant if there are
outstanding W9s, and work to collaborate with your team to get the forms you need.
What is a W2?
A W2 is a tax document for employees on payroll.
What is a 1099?
A 1099 is a document that reports nonemployee compensation, rent, and other types of income to the IRS. As a business owner, you are legally responsible to submit this information – there are penalties for not doing so.
A 1099 is a tax form that the business provides to qualifying service providers and landlords. You are legally required to provide this form to those individuals and submit them to the IRS
At the end of the day, these forms are simple once you understand them, and your business will run exponentially smoother when you focus on getting documentation in order early!
If you need help to continue making sense of tax season, schedule a call and we’ll talk you through it.
