Should we ask our subcontractors' Fed. Tax Id #s before we pay them?

Question

We are a small company with $2-3 Million in revenues/per year. We use Quickbooks for our accounting. Are we required to have subcontractors' Fed. Tax Id #s? If yes, do we have to report the payments made out to them to IRS at the end of year?

Answer 1

The correct form to request from subcontractors is W-9, so you know their tax ID and whether manditory withholding is required from 1099 income.

W-7 is the wrong form (used by a foreigner to apply to the IRS for an ITIN).

PS: The company I work for is a corporation that does many millions per year, and W-9's are often requested by and submitted to customers I do service work for.

Answer 2

YES.

You should have completed W-7s for each.

How else are you to complete the 1099s?

sorry, W-9s, not W-7, vb is right. . . .

Answer 3

You must have them fill out a W-9 before you pay them.  If you don't, you need to withhold 28% for taxes.

If you withhold anything for taxes, you must issue a 1099-Misc.

If you don't withhold, then the filing threshold is generally $600 during the year.

Answer 4

If you pay them more than $600 during the course of the year then they need to fill out W-9.  This will provide you with the company's legal name and the ein number.  Note that if your subcontractor is a corporation you will not have to issue them a 1099 regardless of how much you pay them.

Answer 5

Actually, you should get the tax ID # before they START WORKING for you. How else do you know if they are eligible to work in the US?

Answer 6

Yes, if you will be paying them over $600 for the year, you need to have them fill out a W-9 form before you pay them, and at the end of the year give them a 1099-misc and report it to the IRS