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Vendor payment compliance guide
11 Steps to take NOW to survive an IRS audit and avoid insane penalties Table of Contents A strong year-round vendor payment process is critical U.S. penalties Foreign penalties Get started Ensure that your vendor is not an employee Is your vendor a U.S. or foreign entity/individual? Reporting on payments to U.S. vendors Step 1: Obtain a W-9 form PRIOR to payment Step 2: Track all payments made without a W-9 form Step 3: Ensure all W-9 forms are correct and complete
Start TIN Matching
What is TIN Matching? TIN Matching is a free online service from the IRS that allows users to validate the legal name and TIN provided
Get a W-9 before making payments!
Getting a W-9 before you make the first payment to your vendors or independent contractors is critical and the best way to avoid IRS penalties
Be aware of annual solicitation requirements
The IRS requires that companies obtain a vendor’s TIN (Taxpayer Identification Number) prior to making a payment to them. The vendor is typically asked to
Are payments to nonprofits 1099-MISC reportable?
Payments to tax-exempt entities do not have to be reported on a 1099-MISC. Some examples of tax-exempt entities include tax-exempt trusts like IRAs, HSAs, Archer
Danger! Don’t automatically eliminate corporations from 1099 filing
I worked as a controller for both large and midsize companies and we typically just eliminated payments to incorporated vendors from our 1099-MISC filing unless
State 1099-MISC filing requirements
In addition to the federal IRS requirements for 1099-MISC reporting, individual states may have their own withholding and filing requirements. States typically fall within three different
Guide to the IRS Combined Federal/State Filing (CF/SF) Program
In addition to filing information returns (1099 forms) with the IRS, many states also have compliance regulations that require information reporting and state income tax
Guide to services
A payment for services is typically for labor that is performed directly by another person. Examples include accountants, doctors, lawyers, painters, and independent contractors. Unlike
Guide to merchandise and goods
Merchandise, telegrams, telephone service, freight, storage, and similar items Payments of bills for merchandise, telegrams, telephone, freight, storage and similar charges are not Form 1099-MISC