Overview: For Buddy Punch to correctly file taxes for employees (W-2s) and independent contractors (1099s), we must have the right tax identification number (TIN). A TIN represents both a social security number (SSN) and an employer identification number (EIN).
Instructions:
For Employees
For a W-2 employee to be eligible to work in the US, they must have a social security number (SSN), or apply for one with the Social Security Administration.
The Department of Homeland Security makes this a required field on the Form I-9, which every employee must complete and submit to their employer upon hire.
If an employee doesn’t have their SSN immediately upon hire for whatever reason, it can be replaced with all 0s to unblock onboarding. The SSN should be updated as soon as it has been received to avoid failed filings.
If an employee does not have an SSN, their tax filings will fail. This means, Buddy Punch will not be able to submit tax filings for that employee.
Important: Employers or authorized representatives must complete and sign Section 2 of Form I-9, Employment Eligibility Verification, within three business days of the employee's first day of work.
Additional Resources:
For Contractors
Buddy Punch can pay independent contractors that classify as either individuals or businesses. For individuals being paid as a contractor, they will use their Social Security Number (SSN).
For businesses, Buddy Punch needs Federal Employer Identification Numbers (FEINs) and their Legal Business Name.
Additional Resources:
FAQ:
Q: What if my employee applied for a Social Security Number and never received it?
A: If an employee does not have an SSN, their tax filings will fail. This means Buddy Punch will not be able to submit tax filings for that employee. It is important to understand Employer Obligations when it comes to hiring employees who do not provide a Social Security number.
Q: What if my contractor refuses to fill out a Form W-9?
A: If the contractor (individual or business) does not furnish a tax identification number (TIN) in the manner required, or the IRS notifies you that the TIN is incorrect, Backup Withholding is required.
Q: What is the difference between a W-2 Employee and a 1099 Independent contractor?
A: An employee is generally considered anyone who performs services if the business can control what will be done and how it will be done. Independent contractors are normally people in an independent trade, business, or profession in which they offer their services to the public.