There are many types of forms to fill out as a business owner. Many of these tell the IRS when and if forms need to be filled out, the type of payments that need to be applied, taxes that should be withheld and so on.
A key form for year-end (and all year long) is Form W-9.
What Is a W-9?
A W-9 is the form used to collect a taxpayer identification number from someone. In other words, it’s the form you use to get information about vendors, independent contractors or freelancers. It can also be used as proof that you do not need to file an information return. This would happen if the entity filing the form was a corporation.
Unsure how to report on independent contractors?
Best Practices for W-9
The best thing to do is request a Form W-9 before you make your first payment to the vendor. This ensures completion of the form, which you need as a business owner, for tax purposes. While the form doesn’t change that often, it’s good practice to request an updated W-9 annually. This way you can ensure the information is up to date.
Another tip when receiving W-9 forms is to review them as you receive them. Be sure all the boxes are appropriately filled out and the form is signed by the taxpayer. This will be key if the IRS sends you a notice regarding incorrect information. Additionally, getting this corrected right away will be easier than trying to track down a new W-9 in January of the following year, when you are rushing to prepare all your information returns.
There are software programs and apps that will assist you in requesting and receiving W-9 information from your vendors. Additionally, your accounting program may have options to input W-9 data as well as reports to be run to gather missing information. Tackling this list monthly or quarterly makes this task simpler and less overwhelming. Similar programs and apps can be used to file your information returns at year-end, but only if your W-9 information is correct.
You can use the e-services site from the IRS to check the TIN of a vendor. If you receive information that you are unsure about from a vendor, you can verify that the TIN matches their name through this site.
Why W-9 Forms Matter to Your Business
The W-9 form tracks information on vendors that help you do business. It also allows you to prove whether or not you need to provide information returns for those vendors. This information is vital to your financial reporting.
The best advice we can give is collect W-9s early and often.
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