With so many deadlines demanding attention, business owners will often meet one and then put it in the rearview mirror as they move onto the next. While it is certainly satisfying to scratch a filing off the to-do list, putting some compliance requirements out of mind until the next year-end can actually compound the work and stress the next time they come due.
A perfect example of this phenomenon is Form 1099 reporting of certain payments made in trade or business. Even though this year’s January 31 deadline has come and gone, companies that stay on top of collecting the necessary information from vendors throughout the year via IRS Form W-9 can considerably reduce the headache of tracking it all down at once at the end of the year.
Request W-9s in real time
Whether you do business as an individual or sole proprietor or your company is classified as a partnership, corporation or LLC, the IRS requires the reporting of vendor and other types of payments via Form 1099 each calendar year. Taxpayers must use Form W-9 to gather information about each vendor. Staying on top of the W-9 requirement becomes much easier when collected in real time.
Requesting a W-9 from each vendor as soon as the business relationship begins is a best practice for tax record keeping and also prevents a year-end rush to track down vendors with whom you may no longer be working. Now that 1099s are due to the IRS one month earlier (January 31 instead of the February 28 due date in previous years), businesses have even less time to gather information and prepare this filling.
Stay on top of W-4s
In order to file accurate payroll information with the IRS, companies need updated Form W-4s on file for every employee. This employee withholding allowance certification instructs employers on how much federal income tax to take out of each paycheck. While most companies do not require new W-4s to be filed each year, it is a good idea to consistently remind employees to review and update should their personal or financial situation changes.
RKL has a team of professionals dedicated to helping businesses prepare for and comply with payroll and 1099 reporting requirements. Contact one of our local offices with any questions or for assistance.
Contributed by Susan L. Smith, Advanced Tax Paraprofessional in RKL’s Tax Services Group. Sue has more than 30 years’ experience conducting payroll services and preparing individual tax returns for clients.