Collecting W-9 Forms From Vendors
You may have heard of W-2s, W-4s, and 1099s when it comes time to get your business taxes in order, but are you also familiar with the highly important form known as a W-9? Much like any other IRS document related to taxes, it is important for employers to collect W-9 forms from vendors in order to accurately report taxes and remain compliant with the law.
In this article, we will discuss what a W-9 form is and why it is important for you to collect it from the vendors you may have.
What W-9 Forms are and why are they important?
The W-9 form is an IRS document that vendors must complete before they can be paid. This form provides their taxpayer identification information (TIN), which you need to report payments made to vendors who are independent contractors. A W-9 also allows them to certify that the TIN that they have given you is correct and up to date as well as allows the employer to properly file 1099s at year-end.
This form can be used for vendors providing services, such as freelancers, consultants, contractors, those selling products, those renting out property, and anyone else from whom your business receives payments. It is important that all businesses collect these forms from their vendors in order to remain compliant with IRS rules and regulations.
Collecting W-9s allows employers to ensure proper payment of vendors’ taxes by withholding the correct amount of federal income tax from their payments. Collecting these documents also helps protect businesses against fraud and provides accurate contact information. Collecting these forms from vendors is an essential step in protecting businesses against potential liabilities related to fraudulent activity.
The benefits of collecting W-9s
The benefits of collecting W-9s from vendors include:
Ensuring vendors are paying their taxes correctly by withholding the correct amount of federal income tax.
Protecting businesses against potential fraud and liabilities related to fraudulent activity.
Providing accurate contact information for vendors in case any questions arise during the year or at tax time.
Streamlining the process of filing 1099s at the end of the year, as all vendors will have provided their TIN on their W-9 forms.
Reducing the chance of vendors being classified as employees instead of independent contractors.
As you can see, collecting W-9s from vendors is an essential step in protecting businesses and ensuring that vendors are paying their taxes properly. By collecting these forms, employers can remain compliant with tax laws, protect themselves against potential liabilities and inaccurate information, and streamline the 1099 filing process.
How W-9s can help employers with their accounting services
In addition to protecting businesses from potential liabilities, collecting W-9s can also help employers with their accounting services. By having vendors complete these forms in advance, employers will have the accurate TIN numbers they need to properly report payments made to vendors. This makes filing taxes much easier and more efficient as all their information is already on file.
Collecting W-9s also helps prevent any issues that may arise due to inaccurate or incomplete information being reported by the employer at tax time, saving time and money when it comes time to file taxes. Additionally, collecting W-9s allows employers to easily look up vendors’ contact information should any questions arise throughout the year.
Overall, having these W-9s filled out before they can be paid is an efficient and secure way to protect businesses.
4 helpful tips on how to efficiently gather W-9s
Now that we know what W-9 forms are and the benefits that come along with collecting them each year, here are some helpful tips for making sure you receive them consistently and on time:
1. Make sure vendors understand why they need to fill out and sign W-9s before they are paid. This form is essential for proper tax filing so hammering home how important they are is a good first step in assuring you get them from each of the vendors you do business with.
2. Have them complete the W-9s online or provide printed forms that vendors can mail back to you if needed. Much like your business, vendors have a lot on their plate at any given time so this can help make it easier for them each time it comes to send them. Making the process as efficient as possible for them can make it one less tedious task on their list of to-dos near tax time.
3. Send timely reminders to those who have not yet submitted their W-9s so that there is no delay in payments due to incomplete information. It can be easy to forget something if it comes around once a year, so sending frequent reminders can help keep the idea of sending these forms in the front of vendors' minds. When doing this, remember to do so in a manner that is understanding and helpful rather than nagging or coming from a place of frustration.
4. Utilize technology such as eSignatures and digital documents when collecting W-9s for more efficient processing and storage of documents. This can further make the process more manageable for both you and the vendor so utilizing digital technology to help this particular need makes sense.
Closing thoughts about getting W-9 forms from vendors
Collecting W-9 forms from vendors is a critical part of protecting businesses and remaining compliant with tax laws. Employers should take the time to understand why collecting W-9s are important as well as provide helpful tips and reminders for vendors who have yet to submit their documents. By taking the necessary steps, employers can ensure that all vendors' information is up-to-date so that filing taxes each year goes smoothly and without issue.
Hasenbank Accounting Services provides remote accounting support to Managed Service Providers and IT businesses. With over 27 years of accounting experience and 23 years supporting the IT industry, we are focused on making the financial aspects of your MSP business one less thing to worry about. Contact us today to see how we can help you.