When to do W-9/1099 and Independent Contractor Agreement

[Jared Patton]

I am new to investing (focused just on flipping right now)and have never run a small business. Through books I've read recommended on Bigger Pockets and researching, I know that you need to have independent contractors fill out a W-9 and then send them a 1099 at the end of the year.  I have a couple of questions that for some reason my accountant can't seem to clarify for me.

1.) How do you know which contractors you use need to fill out a W-9? For instance, I know that a couple of my general contractors have their own LLC and are smaller companies and therefore probably need to fill them out. If I use a large company for HVAC or something, I imagine they don't need to fill out a W-9. I was wondering if there is a definitive way to know who to have fill out a W-9 so I don't just throw them at everyone like my accountant suggests.

2.) If I am using a general contractor to manage my whole project and the cost of the subcontractors that he uses are rolled into his lump sum fee that I pay over scheduled increments, do I just have the general contractor fill out a W-9 since I am only issuing checks to him?

3.) When filling out Independent Contractor Agreements, do I literally have each subcontractor fill one out?  And again, if my GC is managing everything, do I need to have all of his subs sign an Independent Contractor Agreement or is it covered under the one the GC signs since I am just paying him?

Sorry for questions that I feel are probably very basic, but I've been unsuccessful in searching the forums, searching online, and in talks with my accountant.

Thanks!

[Phillip Weickert]

The general rule is if the business is incorporated then you do not need to fill out a 1099-Misc. Therefore any LLC or individual name will need to receive a 1099-Misc. The filing requirement threshold for a 1099-Misc is $600. So if any contractor is below that amount you are not required to file a 1099-Misc. If you are unsure and want to file, its always better to get the W-9 filled out and file a 1099-Misc.

If you are only paying the GC (GC pays subs), then you only file with the GC.  Your expense is related to him.  He will need to file a 1099 for all the subs.

I am not 100% sure on the 3rd question, however I would take a stab saying if you have a contract with the GC that it states anyone he hires (subs) falls under this agreement.  Since you are paying only one person (GC), then i wouldn't think you would need a contract for every sub.  The one contract you have with the GC which has the clause anyone he/she hires fall under that initial contract.