Hiring Freelance SEO Writers / Independent Contractors: Which Tax Forms Do I Need?


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If you’re a regular reader of my blogs/articles, you’ve read the story of how — when I first started my SEO writing career in 2007 — I got so busy within the first couple of months that I had to hire outsource help. It’s the one thing I love about this type of writing – the work can come “fast and furious,” to borrow a movie title.

When you hire others to help you in your freelance business, it opens up a whole new world of necessary paperwork; namely dealing with the IRS. And if you don’t do it right, you can wind up in big trouble with Uncle Sam if you don’t do things right, as I found out one year when I owed a whopping $17,000 in taxes.

This post was inspired by a question from another freelance writer recently asking me about this.

Her email disappeared from my folders, or I would have copied it verbatim, but basically she wanted to know if she needed to issue a W9 or 1099 to those she hired. Note: The following info is for those required to pay U.S. taxes. The issue of hiring foreign contractors is addressed briefly here as well though.

Hiriing Freelance Help: Insight on IRS Forms W9 and 1099

Hiring Freelance Help: The Difference between a 1099 and a W9

One form (a W9) is what the freelancer will give you at the beginning of your working relationship; the other (a 1099) is what you will issue them at the end of the tax year. Following is the difference.

What is a W9 Form?

The W-9 form gets the information employers need from freelancers to correctly issue a 1099 at the end of the tax year. On it, the freelancer / independent contractor will fill in their name, address and Social Security number or Tax ID (EIN) number. Here’s what a W9 Form looks like.

These forms are free (all federal U.S. Tax Forms are) and you can get all of them from the IRS’s website and IRS.gov.

FYI, I’m asked for this form from clients my SEO writing company does business with. So I keep a signed one on file as a pdf; that way when I’m asked for it, I can easily send it along.

Penalties for Submitting Incorrect Info on a W9

Penalties for submitting incorrect info can range from $50 to $500, depending on if the IRS feels it was intentional or not.

If they feel that it was an honest mistake that was not intended to defraud the government, the fine is only $50 as of this writing. In cases where it’s evident that it was done to deceive and/or defraud the government, not only could you be subject to a $500 fine, you could be also face jail time.

Learn more about W9s and the penalties for not filling one out and/or filling it out incorrectly.

What Is a 1099?

This is the form that an employer issues to a freelancer / independent contractor at the end of the tax year to show how much they paid them. Here’s what a 1099-MISC Form looks like.

At the time of this writing, if you as a freelancer / contractor earn more than $600 in wages/compensation from any one employer/source, you are required to report that income to the Internal Revenue Service (IRS) – on which you will be taxed.

Should You Issue 1099’s to Freelancers Even if You Pay Them Less Than $600 per Year?

Here’s a follow-up question I received about the $600 limit.

I just hired 10 new writers and had no idea what to do! I 1099 everyone right.? Even if they make less than $600?

And the answer is, yes, you should get W9s and send out 1099’s to every freelance writer you hire, even if you pay them less than $600. And the reason is, you don’t want to have to pay taxes on this money yourself. Now, whether or not they report the less-than $600 you pay them to the IRS is up to them (they’re not required to). But as a business person hiring freelancers, it’s just good business practice to get in the habit of issuing a 1099 to every independent contractor you hire.

Penalties for Filing a 1099 Late

If you fail to issue 1099’s to freelancers/independent contractors you hire, you must pay a penalty, which ranges from $30 to $250 per form ($500,000 maximum per year), depending on how long past the deadline you issue them. These were the following penalties as of tax year 2012:

$30 penalty for filing a 1099 not more than 30 days late;

$60 penalty for filing more than 30 days late, but before August 1;

$100 penalty for after August 1st;

$250 penalty for intentional failure to file.

Remember, these penalties are per infraction (per form).

FYI, most independent contractors won’t claim the income you paid them if you don’t issue them a 1099, so the IRS will never know.

HOWEVER, again, that’s income that YOU will have to pay taxes on. And if by chance one of them does report the income and you haven’t issued a 1099, then the IRS will come looking for you (never a good thing!) – and who knows what else they may find if they do – not that you’re doing anything wrong, right?

So, just do the right thing and get in compliance by asking for and issuing the correct forms from jump, ok?

Why It’s Important When Hiring Freelance Help to Get a W9 & Issue a 1099

This is why it’s important for you as the hiring entity (employer) to get a W9 from a freelancer when they start working from you. You have all the info you need to report that income you paid out to the IRS.

If you don’t report to the IRS that you paid out this income to a freelancer/independent contractor, it will count as income YOU earned and you will have to pay taxes on it (instead of the freelancer).

This means your tax bill could be higher and/ or tax refund lower.

Hiring Foreign (Non-U.S.) Freelance Outsource Help

“I need to issue a 1099 to a foreign subcontractor. Do I still send out a W-9 Form?”

No. Form W-9 is used to gather information only from US persons and businesses. If you have a foreign contractor working for you, that person will need to fill out one of the several Form W-8 documents. Forms in the W-8 series are designed to indicate how much, if any, of payments made to a foreign person or business should be withheld for US income taxes.  [Source: Taxes.About.com, What’s Form W-9?]

Outsourcing: The #1 Way to Grow Your SEO Writing Business

While dealing with the IRS is something most of us try NOT to do, it’s a necessary part of growing your SEO writing business – and it’s a heck of a lot easier than dealing with employees (where you issue W2s and are responsible for a whole host of things you don’t have to worry about when dealing with independent contractors).

And, hiring others to help you with your business is one of the surest signs that you’re growing. That’s another wonderful thing about this type of freelance business – you can grow it as large or keep it as small as you want. It’s all up to you!

Related Posts

How to Outsource SEO Writing Jobs So You Earn More as a Freelance Writer: The Ultimate Guide

An SEO Writer Asks, “Is it a good idea to be a freelancer who only takes on outsourced jobs from other freelancers?”

Learn more about hiring outsource help in The Freelance Writer’s Outsource Package, and . . .

Happy Independence Day to my American friends!

Best,
Yuwanda

P.S.: Get 25% off the SEO Content Writing Package thru this Sunday, the 7th.

P.P.S.: FYI, did you know that the average salary of SEO copywriters increased by $10,000 in a 7-month span (Sept 2012). It did! Proof?

SEO Content Writer Average Salary, Fall 2012

Remember, when you learn how to write search engine-optimized content, you learn so much more than this one skill because it gives you the knowledge you need to take control of your life.

P.P.P. S.: Avoid freelance writing dry spells by making extra money as an affiliate marketer: Learn how to make money online fast ($50-$150/day) in the best-selling ebook, How to Make Money Placing Ads on Free Classified Ad Sites.

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4 Comments so far

  1. Karen Cioffi` on July 4th, 2013

    Great information. I’ve had to take care of tax forms when I hired freelance contractors for a couple of my projects. You always want to do it right.

  2. Glad you found it helpful Karen. It can be confusing if it’s all new to you, but it’s best to take the time to figure out how to do it right from the beginning, otherwise you could wind up in hot water with Uncle Sam — and as I’ve experienced first hand, that is something you DEFINITELY don’t want to have to deal with. 🙂

  3. Sharon Hurley Hall on July 9th, 2013

    Great info as always, Yuwanda. As a non-US freelancer who is not paying nor liable for taxation in the US, the form I usually have to fill in for US clients is the W8-BEN.

  4. Thanks for that info Sharon. I’m sure it will help some of the non-U.S. readers of the site. 🙂


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