Avoiding Incorrect 1099 Vendor Information, and B-Notices, and Penalties

In our last post, we talked about penalties. This post will go in-depth on avoiding penalties. Using the vendor management tools in Tax1099.com can save you a lot of hassle, and maybe some money. Tax1099.com helps protect you against incorrect filings, and the corresponding penalties.

Reporting Vendor Information

As you know, you should collect a W-9 from a vendor before you begin paying that vendor. You can gather either a paper or an electronic W-9.

Collecting and storing paper W-9 forms can be time-consuming. You may have to distribute many copies of W-9 forms, as paper seems to have a propensity to get lost. You might need to buy folders, tabs, or even a filing cabinet to keep track of the forms. W-9 forms contain personal information. Storing this information in a secure location can be cumbersome. A good alternative to collecting and storing paper W-9 forms is W-9 e-solicitation.

Tax1099.com enables you to request W-9 forms from your vendors. If you select this service, the vendor will receive a link to their W-9 form, via e-mail. The vendor will click on the link, complete the W-9, and e-sign the form.

When you select W-9 e-solicitation through Tax1099.com, we maintain the form. You will be able to access a PDF of the form in your Tax1099.com account. Tax1099.com protects confidential information with 256-bit bank-grade security. Your vendors’ W-9 forms will be secure and accessible – the solution to the paper W-9 problem.

W-9 forms can also be e-solicited during the filing process. If you collected a paper W-9 and misplaced it, for example, e-soliciting a W-9 is a good option. Changes the vendor makes to the W-9 will update in that vendor’s Tax1099.com record. Make sure to update the vendor’s records in other systems you may use.

Taxpayer Identification Number (TIN) Matching Requests

TIN matching is another validation method. The IRS offers TIN matching opportunities. Requesting TIN match confirmations from the IRS can be a long process. First, you must register. The IRS must accept your registration. Tax1099.com is already registered with the IRS. We will run your TIN match requests immediately. This circumnavigates the IRS registration and confirmation process, which can take months.

Unscrupulous vendors sometimes provide incorrect information to avoid taxation. These vendors might provide an incorrect TIN. Vendors might also provide their “doing business as” name, rather than their legal name. How can you protect yourself against penalties for incorrect information?

You may also be wondering if the IRS will pick up on these errors. The IRS matches information submitted on a 1099 to their database of names and TINs. If there is a mismatch, the IRS will issue a CP2100 or CP2100A to the payer. This begins the B-notice process. The vendor must attempt to collect W-9 information from the vendor. The vendor has up to 30 days to respond with their W-9 information. After 30 days, the payer must withhold 28% of future payments from that vendor. If there is no response, or if the response is incorrect, the payer may be liable.

As part of the B-notice phase, the IRS initiates an abatement process. During this phase, you can provide the IRS with records of W-9 solicitation and TIN matching. These records show the actions you took to gather and confirm vendor information.

Deadline Management

The vendor form delivery deadline arrives before the federal filing deadline. With Tax1099.com, you can send a vendor form and delay the e-file until its due date. This gives you time to hear back from vendors, after they have received their forms.

Here’s an example of how scheduling your e-file through Tax1099.com gives you more flexibility:

Let’s say you enter a vendor’s 1099 information into Tax1099.com on January the 28th. You select March the 30th as the scheduled date for the forms to reach the IRS. You submit and pay for the form, and select to have the form e-mailed to your vendor through Tax1099.com.

Say you made a TIN match request for that vendor. Tax1099.com processes your request immediately. You receive the results by e-mail two days later, only to find there is a mismatch.

You use Tax1099.com to e-solicit a W-9 from the vendor on February the 3rd. The next day, you receive an e-mail notifying you that the vendor has updated their W-9.

On February 5th, you edit the vendor’s information.

On March the 30th, the IRS receives the form, with the edits. You have met the vendor form delivery deadline, made edits, and met the IRS deadline.

Bottom Line

Tax1099.com provides tools for vendor and deadline management. Utilizes these tools protects you against possible penalties. There are many benefits of requesting W-9 forms and TIN matching through Tax1099.com. These requests proactively alert you to incorrect information. You can schedule your forms to allow for easy editing in Tax1099.com. These requests also provide documentation for the IRS, if a vendor does not provide the correct information. Institute proactive W-9 and TIN Matching processes to help you manage potential penalties.