It will save you time in the long run.
Inevitably every January, as accountants we’re chasing down a rogue vendor from whom our client has forgotten to obtain a W9 form. Every once in a while, we’ll get someone who, for whatever reason, flat out refuses. The vendor’s refusal to provide their information doesn’t absolve your responsibility as a business to report the payment (read more about that in our blog Taking the mystery out of IRS Form 1099). If you find yourself in this situation, you’ll need to file a paper 1099, and in the EIN/SSN box write “REFUSED” and mail copies to both the vendor and the IRS.
It will keep you out of hot water with the IRS. AND it will save you money.
Every small business’ favorite arch nemesis, the Internal Revenue Service, likes to keep track of the money exchanged for business purposes. That’s why we’re required to file 1099s; they’re informational returns designed to help reconcile what certain types of businesses report as income. If you pay a large number of vendors for whom you should report via 1099 and fail to do so, the fines can add up – $50 to $280 per return for late filing, and $570 for intentional disregard (2022 figures). Having your vendors’ W9 before they begin work is the first step in making sure you’re ready to file come tax time.
You’ll keep your accountant happy.
If you’re outsourcing your accounting function (do it, you’ll thank us later), your accountant will hopefully coach you on getting your vendors’ W9s as soon as you can when contracting with them. But life happens. The time you’ll save yourself and your accountant will save you both a lot of stress in January.
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