Saturday, January 31, 2015

1099's W-9's and Certificate of Insurance....

This time of year is very busy for bookkeepers. We have until the end of January... or this year it's Feb. 2nd. because Jan. 31 falls on a Saturday, to print and mail W-2's to employees, and 1099's to sub-contractors.

If you're not certain if a worker is an employee or a sub-contractor, please refer to this IRS Link Subcontractor FAQ

To save yourself time, trouble and money this time of year, please get into the habit of asking your subcontractors for their W-9, Request for Taxpayer ID and for a certificate of insurance from them as well. This will really save you time and money once your Worker's Comp Audit rolls around.

Example, you need the type of help a subcontractor can provide, such as computer repair or help with a remodeling project. You find someone who's highly recommended, they do the job, you pay them and the two of you part ways. Now comes year-end and we need tax ID's and mailing addresses... whoops, you forgot to get that when you contracted them. You call, the phone number is no longer in service, or they've moved and not left a forwarding address. If you've paid them over $600 per year, you're responsible for issuing them a 1099 at the end of the year. Not doing so may result in a $50 fine per occurrence and disallowing the write-off. In other words, someone is going to pay income taxes on that money, if not them, then you will.

To add insult to injury, along comes your Insurance agent, it's time for your annual Worker's Comp Audit and you not only don't have their tax ID and contact information, but you also don't have their certificate of insurance. This results in you having to pay higher workers compensation insurance.

Bottom line... No one gets paid until they've provided you with a W-9 and certificate of insurance!