Are you prepared to file 1099 forms for payments made to your vendors in the course of business? Have you collected the W9 forms so that you can file the information in January of next year? In order to know which vendors are subject to receiving a 1099, you should have them complete and return the Request for Taxpayer Identification Number and Certification form W9.
Form W-9 is used by persons required to file information returns with the IRS to get the payee’s (or other person’s) correct name and TIN. For individuals, the TIN is generally a social security number (SSN). If a payee refuses to submit a W-9 form, you must being backup withholding of 28% from amounts due to them.
Once the form has been returned, you may use the IRS TIN matching service to verify the information is correct. TIN matching allows the payer who is required to file forms 1099 to match TIN and name combinations with IRS records before submitting forms to the IRS. This verifying of information may reduce the number of backup withholding notices (CP2100) received in the case of name/TIN mismatches. To use this service, go to irs.gov and search for e-services.
Payers must be listed on the IRS Payer Account File (PAF) database in order to participate. If your firm has not filed information returns with the IRS in one of the past two tax years, you are not eligible. A principal of the business must complete a TIN Matching Application after registering.
After you have filed 1099 forms, you may receive a notice from the IRS that there is a name/TIN mismatch. If the information you have matches the IRS information listed on the notice, you must begin backup withholding of 28% which will be paid to the IRS. If you find that you have made a data entry error (and the information given to you matches the information on the notice), make the correction but do not begin any backup withholding.
The best way to guarantee that you will receive the W9 form with the information needed is to not pay your vendor until it is received. If you must pay before receiving the form, withhold the mandatory 28% to make sure you remain in compliance with the IRS guidelines. Once the form is received, you may then pay the full amount owed on invoices.
Form W9 can be found on our website at http://affordablebookkeepingandpayroll.com/customer-resources/
For more information on this topic, see http://www.irs.gov/pub/irs-pdf/iw9.pdf
Please be aware that the IRS has changed the filing deadline for these forms. In the past, they were due to the recipients by January 31 and paper copies were due February 28. Beginning in 2017, all 1099 Misc forms are due to the IRS by January 31. Please make a note of this new due date to avoid late filing penalties.