If your business spends $600 or more for services from another business or independent contractor during the tax year, you may have to report the amount on a Form 1099. How does a business track these vendors and payments? The answer is simple: Through adequate books and records.
A business should be mindful of its requirement to collect information on its vendors all throughout the year. When you encounter a new vendor, a Form W9 should be collected from that vendor. Form W9 is the form used to communicate information that will eventually be reported on the annual Form 1099 such as the business name, address, entity type and federal ID number. It is best to collect the Form W9 before payment is provided in order to avoid costly issues later on.
Not all vendors will be issued a Form 1099, but it is better to have the information and not need it, than need the information and not have it. As your business grows you may require additional services and having the appropriate records can save a great deal of time and money.
To download a PDF copy of the standard W9 form, click here. Or, contact us for further assistance.
Other Cost Saving Tips:
- Go Paperless… Go Green.
Keeping accurate records is a must, but that doesn’t always mean storing boxes of archived documents. Electronic copies can be more effective as they are easily accessible and literally take up no space in your office. This also makes it simple to send documents to your tax professionals should questions arise regarding a specific transaction.
- Track Independent Contractors in Quickbooks.
Quickbooks has a function where you can track vendor information and code as a vendor who should receive a 1099. You can input all pertinent information of the vendor including their Federal Tax ID number for easy processing of Forms 1099 at year end.
- Hire a Bookkeeper.
Having an experienced Bookkeeper throughout the year to keep your accounting updated and accurate can prevent costly adjustments by your tax professional. A bookkeeper’s hourly rate is much lower than that of a tax professional, so you may have to spend a little now to save a lot later. Our bookkeeping staff is ready to assist you with your accounting and record keeping needs.