Proper Recording for Vendors: The W-9, 1099-MISC, and 1096
L. Paul Jouet, Jr., Owner of Tax Help NOLA
As a business owner, you are required to track all transactions, including those made with vendors, contractors, and subcontractors. IRS forms W-9, 1099-MISC, and 1096 are all used to track transactions with sole proprietorships, partnerships, and LLCs (corporations are not required to do this). The IRS uses these forms to make sure businesses are reporting information correctly for tax purposes. Below you will find a description of each document along with the correct way to complete and file the form.
Internal Revenue Service Form W-9 is the “Request for Taxpayer Identification Number.” This document is used by businesses to obtain information about their vendors, contractors and subcontractors. The W-9 is called an “information return,” since it serves simply as a record keeping tool. The IRS requires businesses and organizations to obtain Form W-9 from all of their vendors, contractors and subcontractors who are classified as sole proprietors, partnerships, or LLCs for the purposes of filing these information returns. The IRS can call upon you to present this form at any time.
- Obtain Form W-9. In general, Form W-9 should be provided by the business or organization that you pay. If not provided, Form W-9 is available from the IRS website or by phone at 1-800-829-3676.
- The form should be completed, providing information about the vendor, contractor, or subcontractors. This includes name (as known to the IRS), formal business name (if applicable), and indication if an individual income tax payer or a business entity, and address. The address should match the address on file with the IRS.
- The taxpayer’s identification number in Part I. The TIN is either a social security number if filing this form as an individual income taxpayer or employer identification number if for a business. The SSN or EIN should match the IRS’ records for the name and address you previously provided.
- Make sure Form W-9 in Part II is signed.
- The W-9 is kept on file in your office. You do not need to send the form to the IRS. It is recommended that the document should be kept on file for 5 years.
A 1099-MISC needs to be issued by your trade or business under many situations when you pay someone for rent, services, royalties or other various fees.
- Determine that you paid $600 or more in compensation for services rendered by a nonemployee to your trade or business. Include the gross amount of payments in box 7, including anything you paid the contractor for supplies and materials.
- Determine that you paid $600 ormore in rent for office space, machines,equipment or land in the course of your trade or business. Write the amount in box 1. Do not include amounts paid to corporations or real estate agents.
- Verify that your trade or business gave any prizes or awards to an individual who is not your employee. Include only amounts of $600 or more. Put amounts in box 3. But don’t report it if the prize was transferred directly to charity.
- Verify that your trade or business paid $600 or more to an attorney or corporation for any legal services. Write the amount in box 7. If you cannot determine the amount paid that applies to legal services, write the gross amount paid, even if less than $600, in box 13 and put the letter A after the amount. You must furnish your vendors, contractors, and subcontractors their 1099 by January 31.
When your trade or business has issued a 1099-MISC or any 1098, 1099, 5498 or W2-G to anyone, you have to send the IRS the Form 1096 summary. A 1096 is a summary of all your 1099s throughout the tax year.
- Determine if you have issued any 1099-MISCs to anyone in the course of your trade or business. These are commonly issued to report payments of $600 or more for rent, contract workers, professional fees and other payments to individuals.
- One Form 1096 can accompany one 1099 or many 1099s or other information returns, but you should submit a separate 1096 for each type of information return summarizing the data on the forms.
- Type your name, address, phone number, and either your Employer Identification Number (EIN) or Social Security Number.
- Check the box at the bottom to indicate the type of form being filed. Check only one box. For example, if you are filing 1099-MISCs, check the box for 1099-MISCs.
- Sign your name, title, and date before mailing the completed form to the IRS center nearest you. Addresses are on the second page of Form 1096.
- The due date is included in the directions for the form. An organization filing tax year Forms 1099 must send this information to the IRS by February 28 of every year.