1099 Forms / W2 Forms —- ‘Tis the Season!
Christmas and New Year’s Holidays are an interesting time for us “bean counters.” We enjoy the quiet very much and relish in the peace of mind of this time of year (hint, hint: shop Amazon Prime for gifts to show up at your door!)
We bask in this “quiet” because hardly anyone wants to talk boring accounting and numbers this time of year. The pro-active planners have done their tax financial analysis between summer and halloween with their CPA’s / Tax Preparers. The procrastinators will deal with the consequences of not planning ahead say…. somewhere between March and April. The rest will file extensions to deal with it closer to September and October when they’re done with their summer adventures and when kids go back to school.
But, as New Year’s holiday gets closer, us bean counters start getting anxious and in position. As soon as the next business day after this holiday comes it’s total and complete insanity for us. We have to get things ready for the CPA / Tax Preparers between January and March, extremely busy months for us. I’m talking 12-hour days or more, especially in January due to those very teeny tiny, but very important, forms that must be sent out: 1099 forms and W2 forms.
W2 Forms (or “W2s”)
W2s must be issued to employees by February 1st and to the SSA (Social Security Administration) by February 29th if filing manually, or March 31st if filing electronically. That’s right, W2s do not go to the IRS; it is Social Security Administration that cares whether or not employees paid the correct amount of taxes based on their wages / salaries (how does the IRS know what was reported is correct? It matches the summary figures reported to SSA with payroll taxes the business reported and paid, sneaky and smart, huh?).
1099 Forms (or “1099s”)
1099s must be issued to vendors by February 1st and to the IRS by February 29th if you’re filing them manually (who does this anymore? If you said “me!” you must like to complicate your life). If you’re filing them electronically, they’re due to the IRS by March 31st. The e-file fee is well worth it as it not only replaces buying paper forms but it’s easy to access anywhere with internet to correct errors or add vendors you may have missed. The additional month you have to submit to IRS is great because it gives you plenty of time to get responses from vendors on W9s or research and correct errors. Believe me, you will appreciate this extra time when you hear from vendors who think there’s a mistake in their form or never received it, and so on.
Have I stressed you out already? Have better things to do than worry about these forms? Contact us!
We will handle the process starting with any of these steps you haven’t done yourself, and finish it for you (some clients choose to handle Step 1, or both Step 1 and 2, or Steps 1 through 3, while delegating the rest to us):
1.Collect/Gather W9 forms from your vendors – If you follow IRS guidelines by the book, you already collected W9s from your vendors throughout the year, ideally before you made that first payment to them. This is a simple form vendors must complete in order to provide their legal business information to you. Their name, address, and entity type (i.e. C-Corp, S-Corp, LLC, Partnership, Trust/Estate, Individual/Sole Proprietor/Single-member LLC). If we’re your bookkeeper, we collect this information in your accounting file and transfer it directly to forms.
2. Contact those you’re missing via Phone or Email – I personally prefer email since it produces a written record that I’ve done my due diligence shall the vendor refuse to provide me with the information. And yes, that does happen quite often. The vendors refuse to give info because (1) they’ve already been paid and (2) they don’t want their income reported to the IRS for whatever reason. The consequences for you in this scenario is that you might be fined. I’ve never seen it happen in the 10+ years of providing this service to my clients and the 10+ years before that working as an in-house bookkeeper for employers. In this case, I issue the 1099 and mail it without the Tax ID. Let the IRS see I did my due diligence and the vendor refused to provide the info. Should you have an old address and the form is returned via Postal Mail, store it in your files as proof.
3. Collect/Gather Amounts Paid to Vendors during the tax year – This step is non-existent if your accounting file is in order or just a matter of a couple of clicks to produce a report. Hopefully you have kept up with your books throughout the year, or even better you contracted a bookkeeper who has (he/she might have even collected W9s from vendors throughout the year if you have opted to pay for that service). Here at A Bookkeeper’s Corner, we are able to access your file online and gather this for you from your bookkeeping records. If you have contracted us for year-round monthly accounting or clean-up we have your records and provide this service automatically. No online file? We use remote access to access your computer or you may send us a backup of the file.
4. Complete the forms electronically – Your existing accounting program might have this feature or there are many others you may use to gather all the information in one place and have the total payments to the vendors transferred from the accounting program to the form itself (you might be doing a lot of data entry if you choose to do it yourself in a new program and have paid lots of vendors). Issue the forms to your vendors by the deadline via email or by mail- or both. Keep your copies.
5. Wait until close to deadline to send to IRS – Allow time for vendors to review it, possibly not until they file their taxes. They might leave them sealed in their envelopes until their appointment with their tax accountant. You will hear from them then if they feel there’s a mistake or if they have questions. It is best to correct as many errors as possible before you submit your final copy to IRS. It’s less work than sending corrections. Always, always….keep your copies or better yet, you will have a permanent electronic record of when they were sent AND whether or not they were received by the IRS (via email confirmation).
You will hear from vendors at other times in the year requesting additional copies because they’ve lost their form or questioning the amounts reported in their form (a bookkeeper will be able to email a report to show this) and they have filed a tax filing extension. Either way, it’s important to keep record of every step listed above.
If you’d rather be working on billable hours, building your products, developing your own services, or working on that great idea for the new year, contact us and we will handle this portion for you, even if we haven’t worked on your accounting before.
Contracting a bookkeeper throughout the year will eliminate some of these steps for you, or all, depending on what you choose. As you can see, a little preparation and organization ahead of time saves lots of headaches in the present moment and in the future.
Click on the chat app here in our site to talk to us. We’re waiting! Happy New Year everyone!!!!