Spring Clean Your Vendor List


Spring is in the air, and we are well beyond the nonstop pace of the holidays. You’re feeling organized, your year-end forms are completed and you are ready to enjoy the warm months ahead. But first, it’s the perfect time to do some spring cleaning!

We all think of the federal 1099-MISC form in December, while reviewing the year’s tax-reportable payments to independent contractors. But why should you bother thinking about next year’s 1099s when the beautiful weather is luring you outside? The 1099 is a perfect example of how good business practices throughout the year will help make December feel like spring break.

Every time you hire or engage a new vendor to provide a service or a rental arrangement, make sure they fill out a W-9 form and return it to you before you remit payment. Why is the W-9 important? This document will provide you the legal name of the business or individual, the identification number they are using to report their income to the Internal Revenue Service (FEIN or SSN), how is the business organized, and their mailing address. In addition, always try to get an e-mail address for the vendor. This is the quickest way to send their 1099 at year-end. The information contained within the vendor’s W-9 form will help you decide if they even need to receive a 1099. Keep these W-9 forms in a permanent location. The vendor file, which may get archived at the end of the year, is not a good location.

Spring is also a great time to clean up your vendor list in general. Review the vendors that you are currently using and verify you have their W-9. If you don’t have their W-9, take the time now to reach out to them. Does every vendor have an current address, e-mail contact, telephone number and identification number (if applicable)? You can’t always rely on a vendor’s invoice for all the information you need. And it’s much less stressful to track down missing information now, instead of rushing around at the end of the year! Consider creating a form that contains any specific contact information you need and send this to your vendor to be completed and returned. Check your files for duplicate vendors and consider using standard naming conventions. Duplicate vendors may be difficult to locate at year-end and you may overlook a 1099-reportable payment.

While all vendors should be part of this process, pay close attention to those vendors who will likely be receiving a 1099 at year-end. Any vendor who provides services and is paid more than $600 per year warrants extra due diligence. This list includes your accountant, lawyer, landscaper, entertainers, caterers, and any independent contractor that your organization has made payments to. You are not required to send a 1099 to corporations, with the exception of legal services. If you rent equipment or office space from a vendor, you should be sending them a 1099 (as long as they are not a corporation). Always make sure that you are following the law regarding employees versus independent contractors. Employees get a W-2, independent contractors get a 1099. If you have any confusion about whether someone is an employee or an independent contractor, please consult with your accountant.

A bit of spring cleaning will make the year-end process of gathering and preparing 1099’s less stressful and more accurate. You may also find that by catching errors, duplications or missing vendor information early in the year, you will help your cash flow and and improve fraud detection. So before you go out and enjoy the warm spring weather, spend a little quality time with your vendor list. Your future self will thank you!