Julie's Ocean Writing Consultancy

If you’re thinking about hiring a freelance writer as an independent contractor or “1099 employee,” here are a few tax-related things you should know about the process. From the IRS’s perspective, there is no such thing as a “1099 employee.” A worker is either an employee or an independent contractor. The distinction is important because your responsibilities to an employee are different than they will be to the freelancer.

Defining a freelance writer as an independent contractor

The absolute definition of an independent contractor comes from the Internal Revenue Service. Not surprisingly, it exists for tax purposes. One key determination of a writer’s status is who controls the work being performed. If the employer maintains the right to determine what gets done and how it gets done, the “freelance writer” is generally considered an employee. If the employer does not maintain control over the work, but is simply “buying” the end product, the writer is generally considered a true independent contractor.

If you plan to hire a freelance writer to perform work, you should also get to know something about these two important tax forms.

W9
A W9 form is also known as a Request for Taxpayer Identification Number (TIN) and Certification, and is actually completed by the writer. It contains his or her correct legal name and Social Security Number or Employer Identification Number. The writer must furnish a W9 form upon your request. You do not need to submit this form to the IRS, but you do need the information for reporting a freelance writer’s income. Simply keep the completed W9 with your business records for future reference. The IRS recommends that you retain this form for four years.

1099-MISC
The 1099-MISC (Miscellaneous Income) is used to report payments made in the course of a trade or business to others for services. This is a form you fill out and give to both the Internal Revenue Service and the freelance writer following the close of the calendar year in which the freelancer performed work for you. A 1099-MISC must be given to the freelancer no later than January 31, following the year in which the work was performed and must be filed with the IRS no later than February 28, or March 31, if your business files its 1099s electronically.

Generally speaking, a business must file a 1099-MISC if it pays a freelance writer more than $600 for services performed in a calendar year. On the positive side, you do not need to withhold employment taxes or Social Security and Medicare taxes for your freelancer. This is one of the great advantages to your business of working with a freelance writer.

Two notes on 1099s: if your writer is a sole proprietor, you must file the 1099-MISC using the writer’s actual legal name and Social Security Number, regardless of what the writer calls his/her business. If the writer has incorporated, you should file the 1099-MISC using the writer’s corporate name and EIN.

If you file the 1099-MISC using the wrong information, the IRS will send a nice letter on some future date and will require you to clarify the writer’s employment status, then refile a corrected 1099-MISC. You can save yourself some time and effort if you know the freelance writer’s incorporation status ahead of time and file the 1099-MISC accordingly.

Second, don’t misclassify employees as independent contractors in a bid to get around paying employment taxes. The IRS sees that one regularly, and you’ll be required to pay back taxes in full when the Treasury catches up with you.