1099s, W9s and W2s - Oh My!
It’s that time…
Grab your vendor list…
It’s the most wonderful time of…
Nope, I’m not referring to that most enchanting season. I’m referring to that time of the year when we need to check in with all our wonderful contractors and vendors to make sure we've got those crucial W9s on file.
So, what's the big deal about these W9s and Form 1099s, you ask? Let's break it down.
What is a Form 1099?
The Form 1099 is the document you need to send off to the IRS for all those fantastic contractors and vendors you've teamed up with who file their taxes as individuals or single-member LLCs, and who've received more than $600 from you via cash, check, ACH, wire, or even Venmo or PayPal. This little form tells the IRS just how much you paid your contractor or vendor over the year, and it's got to be sent their way by January 31st.
Now, here's the plot twist – you don't have to worry about filing 1099s for anyone who falls under the categories of S-corp, C-corp, partnership, or trust. How do you determine this? It's all in the W9!
What is a W9?
A W9 is simply a Request for Taxpayer Identification Number and Certification, but let's not get too caught up in the jargon. Essentially, it's the form you need from ALL your contractors and vendors to get their company information. They fill in their name, address, and either their social security number or employer identification number. They also indicate their federal tax classification. If they tick the "Individual/sole proprietor or single-member LLC" box – bingo! You'll need to send them a 1099 in January.
To stay on the safe side and avoid any last-minute panic, it's best to collect a W9 from every contractor or vendor before they receive their payment. Nothing gets people moving quite like needing to provide their info to get paid. Once the money's in their hands, well, it can be a bit tougher to get them to respond to any later requests for forms.
Of course, even with the best intentions, things can slip through the cracks. The last thing you want is to be chasing down vendors and contractors in January when you're trying to get those 1099s sorted — which, by the way, need to be filed by January 31. That's why I always strongly recommend giving your files a little check in November each year to make sure you've got a W9 for everyone you've paid over $600 to during the year.
And while you're at it, why not reach out to all your employees to ensure you have their updated addresses on file? You already know all employees get W2s for their earnings during the year. Confirming all their contact info will make sure those W2s find their way to the right doorstep, and you won't end up with a pile of undeliverable W2s in your mailbox.
Let's keep it all running smoothly!
