With the conclusion of the 2021 1099 filing season, make a plan now to implement these six best practices in order to save time next January.
- Request a W-9 before entering into a contract with a vendor. This establishes an understanding that information should be provided by the vendor before the relationship begins.
- Request a W-9 before paying a vendor. Withholding payment until the W-9 is received increases the timeliness of W-9 receipt.
- Enter the vendor Information in your accounting system when the W-9 is received. Updating the vendor profile upon receipt of the W-9 (including whether or not a 1099 is required) keeps vendor info in your financial system up-to-date and allows your software to provide accurate vendor reporting as necessary.
- Establish a filing system. Once you receive vendor information, scan and save the forms on your computer. This allows for easy access and retrieval of information and also prevents misplacing and losing documents.
- If you are using QuickBooks, attach a copy of the W-9 to the vendor.
- Establish an annual vendor update process. Review old vendors and request updated W-9s. Having incorrect information is likely to lead to backup withholding notices (‘B-Notices’) being sent to you from the IRS.
Robert Wallish, CPA
DMS Financial Analyst