Do you have your business vendors (people that you pay) ID numbers?
Categories: Business vendors
Tags: corporation IRS 1099 secretary of state state of incorporation LLC accounting system 1096 forms ID number vendors paid W-9 individual non-corporate software
Business owners should be aware that the IRS is alert to non-filing of 1099 forms. Not filing them could be expensive for the business owner. I once received a phone call from the IRS not 2 months after I had prepared an income tax return for a new client. This is the earliest that I had ever got a call from them after a tax return was filed. The agent was asking about a specific line on the business tax return and whether 1099 forms had been filed for these payments. This demonstrates that the service is being pro-active and checking on 1099 filings early in their process. I've also had new clients that had prepared their own returns and have had business deductions disallowed for not reporting the income to their worker or independent contractor on a 1099 form. Getting these forms filed is one of the best ways for the business owner to protect the deductions on their income tax returns.
The business owner needs to be aware that anytime they are not doing business with a corporate vendor (that is also not their employee or their legal firm), they need to give the vendor a W-9 form and request their tax ID number. Legal firms should also get them even if they are a corporation. If the vendor claims to be a corporation, you should make sure (if not apparent in their name) by checking the status of the corporation in the state that they incorporated. States now have websites to check the status of corporations.
The W-9 form is available on the http://www.irs.gov/ website and they have been keeping a link to the form on the 1st page at the left under “Most requested forms.” The 1099 forms need to be completed by January 31 of the next year whenever over $600 was paid to that business or individual and then given to the vendor. All of these forms are filed with a form 1096 that needs to be filed with the IRS by the end of February. This reporting gets more complicated as a business grows and has more transactions. A good accounting system is recommended and you should get good advise on this. My general advice is to obtain QuickBooks software to track this when the accounting becomes too much to track these items in other ways. This software is quite popular and I can then work with you to help you finish your accounting each year.
This helps the business owner see the need for getting vendor ID numbers, tracking the amounts paid to them and reporting them on a 1099 when they are a legal firm or other non-corporate service provider.
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Hey Sheldon -
Today is Jan. 29, 2008 and a business owner I have done work for over the past two years emailed me a copy of a 2007 Form W-9 today, telling me to fill it out, sign and email it back today because his bookkeeper only has 1 day to finish her paperwork. He just finished draining his bank account to pay his back taxes and has put my work "on hold" until he can afford to pay me. He has never actually filed a 1099, nor has he ever asked me to fill out a W-9 until now. I realize that the 1099 must be postmarked no later than January 31, 2007 and that without a TIN his deduction for the amount he paid me will probably be rejected by the IRS. It's not that I want to get him in trouble, but it doesn't seem fair to dump this on me at the last minute to save his own butt, when he's hurting me financially both in current lost revenue and from last year's taxes he chose not to withhold. I can't find any information as to whether or not I'm required to provide him with a TIN on a 2007 Form W-9 during the following year. I wrote and told him I was going to research the matter further, but that I would be happy to provide him with a 2008 Form W-9 so that we start off on the right foot going forward into '08. I should also mention that I was reading Publication 1281 and found where the request for a TIN should have been made in December of the year the account was opened. I'm not sure how that info applies to my situation, but it sure seems as though failure for a payor to ask for the necessary documentation from a payee in a timely manner doesn't necessarily constitute an emergency situation on a payee - especially when they haven't been getting any work or pay since before the end of the prior year! My question is, do I have to play along with him on this or do I have the option to stall and give him a 2008 W-9 after January 31st to avoid getting slammed with self-employment taxes because he was too lazy to withhold? Thanks - and I look forward to an expedient reply.
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