When Friendly Favors Meet the IRS: Why That W9 Matters

When Friendly Favors Meet the IRS: Why That W9 Matters

A client recently reached out with a question about why 🤨I requested a W9 from them for someone who had done some electrical work for their business. It turns out, this person is a good friend of theirs—a master electrician—who helped out on the side. My client had paid them with a business check💰, and the payment was over $600.

I explained that because this person, regardless of their business designation, performed service work 👷🏻‍♀️ for their business and was paid over $600 via a check, the law🚨requires them to issue a 1099 at the end of the year.

Cue the frustration 😖. My client wasn’t thrilled about the idea, saying it was just a friendly favor and that it didn’t feel fair to make their friend report the income on their tax return.

Here’s the thing: I completely 🙌🏻 get it. Taxes aren’t fun, and no one loves 💔 how the government spends the money we send them. But like it or not, the law is the law. Ignoring it can lead to some not-so-fun consequences down the road.

I advised my client to have an honest conversation with their friend. Even though it started as a favor, because the payment was made through the business and exceeded $600, a 1099 is required. In the end, they followed through, but it was definitely a learning moment 👩🏻‍🏫.

The takeaway? Anytime someone does any‼️service work for your business, start by requesting 📲 a W9. Better yet, let us handle it for you! As your bookkeeper 🫶🏻(or 🎉 future bookkeeper 😉), we can send out W9s on your behalf and make the process as seamless as fresh-baked pie.

If you’re reading this and thinking, “What the heck is a W9 or 1099?” 🤔 check out this blog post W9s and 1099s: The Not-So-Boring Guide to What They Are and Why They Matter for all the details. 

From my desk to yours, thank you for reading. ❤️