14 Nov Mind your “W’s” – It’s Nearly Payment Reporting Season
It’s November. Do you know where your W-9’s and W-8’s are? It is time to prepare for 1099 season. Hopefully, you know which of your suppliers are subject to reporting. Do you have verified tax identification numbers for them all?
Remember that 1099’s with Box 7 nonemployee compensation reporting are due January 31st! Furthermore, the automatic 30-day extension is gone this reporting season so don’t count on easily getting extra time to complete your 1099’s.
Ideally, you have implemented best practices that entail getting the requisite W-9 or W-8 prior to adding a new supplier to the vendor master file. If not, you at least require the supplier to submit the appropriate W form — or at the very least give you their tax ID number — before you issue them payment, right? Otherwise, you must withhold taxes from the payments. If you fail to withhold, it is going to cost you. The IRS has increased penalties in recent years and failing to comply with requirements has gotten expensive!
With reporting around the corner, it’s high time to determine if you are missing any supplier TINs and get them, and — to avoid B-notices — run them through IRS TIN matching for verification.
If you are missing TINs and tax classifications, it’s also time to fix your process. You’ve got to get tax ID numbers from all your vendors when they have the most incentive to provide them — when you first agree to buy from them and prior to any payment! Fixing the process should include making the process easier.
Work with purchasing to ensure they understand the importance of getting supplier information (and screening suppliers) up front. Then set and enforce policy and procedures to make it happen.
These should include a standard “welcome and set up” communication with suppliers that includes the message that a W-9 (or W-8 as appropriate) is required prior to payment.
Make it as easy as possible for suppliers to provide the required information to you. In the past, this might have meant providing a blank W-9 or substitute W-9 form in a mailed package for the supplier to complete and return. But paper is more than passé. It’s slow, cumbersome and expensive. Consider implementing a supplier portal with TIN and tax classification information submission capability that makes it easy for suppliers to submit electronically. Removing friction from any process improves its success, while being easy to do business with enhances your company’s reputation with suppliers.
Mature portal providers offer additional services that include IRS TIN matching service as well as the OFAC proscribed-entities check and address format correction, which takes care of several issues for you.
While the leaves are still falling, get those TINs in and checked. And before the leaves sprout again in the spring, improve your W-9/W-8 gathering process to make next fall’s process a breeze.
Learn how an InvoiceInfo self-service solution can benefit your company; call (678) 335-5735 today or request more information online!