The end of every year brings the beginning of a new one. From an accounting perspective, the beginning of the new year brings many reporting deadlines…specifically, Form 1099. In order to properly prepare a 1099, two things must be provided: a completed Form W-9 from the vendor and the amount paid to them.
The W-9 provides the most crucial piece of information, which is whether or not a 1099 will need to be prepared for any given vendor. Coincidentally, the W-9 is often the most difficult piece to obtain.
As a rule of thumb, we suggest that a vendor fill out a W-9 before their payment is remitted; vendors are usually more eager to provide the information at this point in time. If a vendor is asked to fill out a W-9 at the end of the year, there isn’t any incentive because they have already been paid and there is a chance that they are trying to avoid paying taxes on their earned income.
It’s never too late (or too early) to start gathering the necessary information for 1099 preparations. Being proactive on this front will make things easier at the start of the new year.
Form W-9: http://www.irs.gov/pub/irs-pdf/fw9.pdf
Form 1099-MISC instructions: http://www.irs.gov/pub/irs-pdf/i1099msc.pdf