Best Practices for 1099 Management

W9s in-line for for taxtime ease and flow. 

One of the most easily preventable pain points I come across year after year is the lift of supplying 1099s to vendors, service providers, contractors and anyone you have paid $600 to or more in a calendar tax year. 

It hurts my heart to see so many small businesses spin out in Q1 gathering the documentation federally required by law to be filed by January 31st. It is your obligation as an employer to furnish proof of payment to both the payee and the IRS (US-specific, notably) and it isn’t the funnest thing you’ll do all year, but it doesn’t have to suck your soul out.

You just need a system…built from the bookkeeper’s perspective, of course! 📚🕶️

W9: Simplify 🦴 Organize 🐾 Validate

The hero of our story is the W9 form, who keeps 1099s more queued-up than canine cuties backstage at the National Dog Show on Thanksgiving. By making the submission of a W9 a non-negotiable—before anyone even gets paid—in your onboarding process, you’ve got the success factor for smooth 1099 management at tax-time.

Anytime you hire a contractor, project person, or paid provider, the very first thing you need to service the relationship is to get an accurate and signed W9 form.

Ideally, they will submit that as a course of business with the first invoice and/or signed contract. However, the onus of acquiring W9s sits squarely on your shoulders. It’s your job to make sure that you have the information you need when you need it. Protect the peace of “future you” by having it before you need it.

In the rare and unseemly case that you have to fight or chase a contract for their W9, hashtag red flag, friends. Shady or amateurish business practices do not operate in a silo; you want the people you work with to understand and honor the rules of engagement. You did make these rules up, the IRS did. We all have to play. 

There is an exception to this rule: C Corps do not, technically, have to be issued a 1099. Therefore, if you are paying a C Corp for services, you do not need to ask for a W9, nor do they have to give you one. It is a best practice, however, and it’s rare to see pushback from an organization at this level. A W9 form is only a form, there is no skin off their nose to supply it. Conversely, a 1099 is just a form. It doesn’t hurt anyone to go this extra step for record keeping.

W9 Secured. Now what? 

Those bedrock documents aren’t going to do you any good if they sit in your inbox. Make it a part of your onboarding discipline to get all W9s over to your bookkeeper as soon as possible. If she is worth her salt, she will make it a prerequisite to paying the vendor. W9s grease the wheels of business; it behooves everyone to get those in the hands of the person who will be managing the financial administration of the relationship ASAP. 

Whether you use a payroll company, have an in-house person, or partner with a financial stewart and bookkeeping expert, W9 forms need to be with the person who is responsible for 1099s. Once that happens, you can look forward to checking this annual box with minimal drag.

For all you solo shops, owner/operated, or business builders who also do their own books, please consider this system and workflow a stress-free 1099 season and leave the ball-chasing to Zelda. 

ZELDA P MONEYSWORTH presents The Future-Proofing Bookkeeper’s Best Practices for 1099 Management

STEP 1: All through the year, collect W9s from Vendors Make W9 form submission a prerequisite to getting paid for the contractor. File the form accordingly.

STEP 2: It’s December, run a contractor report What gaps do you have, erroneous information, or missing forms? Now is the time to figure out what you’re missing and get on a mission to get it.  If you’ve done the work of being diligent with W9 collection, this should be a short list. 

STEP 3: It’s January, trigger and mail 1099s to Vendors by 1/31 Once your contractor report is in integrity and the information has been validated, run a 1099 report in QuickBooks (or your favorite third-party accounting software), which will generate 1099 and prep them for mailing to vendors, service providers, project people, and anyone the company paid for work this year above $599. 

🐾🐶🦴

Make it a practice to collect W9s on Day 1, verify the information in December, run a report to deliver on compliance with little to no friction. Nobody wants to spend the first part of the year scrambling to organize the must-have information for anyone you worked with last year. 

Protect your peace by having a system in place that minimizes wasted effort and sets “Future You” up for ease and flow. 

Do you have specific questions about 1099 management or how to get your financial systems in elegant alignment with bookkeeping best practices?  Reach out. We’ll help you stop chasing your tail.

Unleashed Financial Advocates | macro-managing money stuff