What Brands Need to Know About Collecting W-9s and Issuing 1099s

What Brands Need to Know About Collecting W-9s and Issuing 1099s
Lumanu Team

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Lumanu Team

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As the end of the year approaches, you’ll be required to collect W-9 and 1099 tax forms from vendors and freelancers your brand has worked with, including influencers. Navigating tax compliance and paperwork can be a real chore for marketing and finance teams at brands, between managing the back-and-forth of communication to answering questions from freelancers unfamiliar with the process. 

The vendor setup and management process is tedious, between onboarding vendors to your payment platform, collecting banking details, and all the various communications between internal and external partners. Having a centralized vendor approach that not only manages payments to vendors, all tax compliance domestically and internationally and can integrate on top of existing AP software, is critical and will save your team dozens of hours of extra work. From the tax forms you need to collect, issue, and manage, we'll walk you through a step-by-step process for everything brands need to know about collecting and issuing tax forms. 

What are W-9 and 1099 tax forms?

A W-9 form is a document issued by the IRS that an independent contractor or self-employed person/entity contracted to perform work or provide services should provide to any brand they're working with. The form requests information from the independent contractor, such as their legal name, address, taxpayer identification number, or Social Security number.

Brands working with vendors, independent contractors, or self-employed people should always request W-9 forms from them if they're not alternatively given to you voluntarily. 

The IRS also issues a Form 1099 to report the income a brand pays to an independent contractor or self-employed person/entity. Any brand that works with an independent contractor (and pays them more than $600) must file a Form 1099 with IRS for each of the payees it works with and send a copy to the payee as well – ensuring that the payee reports that income on their tax return. 

Any vendor, independent contractor, or self-employed person/entity who is contracted to work with a brand, should request a copy of their 1099 for end-of-the-year tax filing purposes. 

Do brands need to collect W-9 forms from vendors?

As a brand, the safest route is to collect a W-9 form from vendors and independent contractors. Technically, a brand can file a Form 1099 without a W-9 form, all they'd need is the vendor's correct legal information and TIN/SSN, but a W-9 form is the most reliable method to collect this type of information. 

Unlike Form 1099, Form W-9 doesn't need to be filed with IRS. 

When do you collect W-9 forms?

W-9 forms should be collected at the beginning of any contractual agreement between the independent contractor and the brand. As a brand, as soon as you send your 1099 employee(s) a contract, you should request a Form W-9. 

The process of collecting and keeping track of W-9 forms can be tedious. A streamlined and automated process for collecting W-9 forms can help minimize any hand-holding. 

When do you issue a Form 1099?

Brands should issue a Form 1099 to any individual with whom it worked that received an income that did not come from a salary or wages. For a brand, a 1099 employee could include an independent contractor, vendor, freelancer, influencer, creator, etc. 

When are W-9 and 1099 forms due?

If your brand hires a 1099 employee, you are responsible for collecting a W-9 from them to file a Form 1099 at the end of the year. W-9 forms should be issued at the outset of a contractual agreement or obligation, and this information should be obtained to complete and file a 1099 by January 31. While there is no deadline to submit a W-9 to the IRS, failure to collect the necessary information to file a 1099 could result in a fine. 

The IRS requires that 1099 forms are filed by January 31 after the calendar year-end. If you don't submit a Form 1099 on time or submit it late, you will be subject to a penalty and charged monthly interest. 

What's the best way to collect W-9 forms?

This is where an automated centralized vendor approach comes into play, especially critical if you work with a lot of different freelancers like influencers. Lumanu is the only creator-focused payouts platform that acts as a single vendor and automates the entire vendor setup. It's an all-in-one payouts solution that removes the hassles from navigating end-of-the-year tax filing and lets you payout dozens to hundreds of 1099 employees at scale. 

What's the best way to issue 1099s?

In addition to automating and managing W-9s from your vendors, Lumanu also handles issuing 1099s. Onboarding your 1099 employees is grueling enough, but thankfully, Lumanu also handles the administrative tasks that take up the most time. Think of it as having a dedicated colleague who manages the entire vendor setup process from start to finish. Plus, every account comes complete with a dedicated creator success team to ensure your 1099 employees experience a smooth onboarding and are walked through the process every step of the way. 

To learn more about how your brand can automate your vendor setup process and eliminate the hassle of collecting W-9s and issuing 1099s, schedule a demo with us.

‍Disclaimer: This is for informative and educational purposes only. Thus, this is not legal or financial advice.

Lumanu Team

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