As crazy as this sounds, what we really want to talk about today is preparing for next year’s filings. New year, new vendors. That means new information you need to collect and validate. Let’s walk through the steps you should take to prepare for 2017’s filing.
Collecting Vendor Information
George hires five new contractors. He signs in to Tax1099.com and navigates to People > Manage Recipient > Add Recipient. He enters the contractors’ names and e-mail addresses. He then e-solicits W-9 forms on the Manage Recipients screen.
Say George uses an accounting software, such as QuickBooks Online, Bill.com, or Xero. George can collect vendor data in one of those programs, then sync the data to Tax1099.com. This ensures the vendor information is correct in both locations.
George receives an e-mail from Tax1099.com – four of his contractors have updated and e-signed the W-9 form. He clears those contractors to begin working. He contacts Bailey, the fifth contractor, about filling out the form.
Bailey says she didn’t receive the e-mail. It turns out George had the wrong e-mail address for Bailey. He updates the e-mail address in Tax1099.com, and sends another W-9.
Now that Bailey has received the W-9, she updates and e-signs it. George receives another e-mail telling him that she has done so. He logs in to Tax1099.com to view the update.
Validating Vendor Information
While in the Manage Recipients screen, George requests TIN matching. TIN matching checks the vendor name and TIN against the IRS database.
George receives an e-mail from Tax1099.com – three of the contractors’ TIN matches were accepted. The other two contractors’ TIN matches were rejected. George e-solicits another W-9 from those two contractors.
The contractors update their W-9’s. George receives an e-mail informing him that the contractors have made updates.
George runs another TIN match for those two contractors. They both come back rejected. George checks to make sure the contractors have selected the correct TIN type (EIN vs. SSN). George also checks to see if the contractors are using their “doing business as” name, or their full name.
George figures out the mistake with one of the contractors. George updates the contractor’s records in Tax1099.com. Just to be sure, George requests another TIN match. It comes back accepted.
The other contractor gives yet another incorrect vendor-TIN match. George asks him for his social security card, and the contractor refuses. George tells the vendor he’ll have to begin backup withholding income.
The contractor furnishes the social security card.
George updates the contractor’s records, then runs another TIN match, just to be sure. The match is accepted.
Now, George sits back until mid-January. When it comes time to file, he already has approved vendor-TIN matches. All he has to do is add the vendors’ amounts and submit the forms.
Don’t wait to begin this process until filing season. You don’t want to dedicate two weeks of your January to making sure you have the correct information. Preparing now will save you time.
Validating information ahead of time can reduce the risk of penalties. As they say, an ounce of prevention is worth more than a pound of cure.