For filing season 2017, which will cover the 2016 tax year, employers and other payers will be required to get the IRS its copies of tax payment documents at the same time the agency issues statements to taxpayers — January 31st.
This is really big news. Usually we spend a lot of time in January working with our clients to get W-9 info (SSN/TIN, address) in time to send their 1099-MISC forms to freelancers and independent contractors by January 31st… but it’s quite common that January comes and goes and we’re still chasing after vendors for this info. It’s never been that big a deal, because the forms weren’t due to the IRS until a month later (two months, in case of e-filing). So if the vendor didn’t get us their info until late February, we could still file on-time with the IRS.
That’s all changing. In 2017, the deadline to provide W-2s & 1099s to the IRS is the same date as for taxpayers — January 31. This means we’re going to have a real challenge getting this information in time… even more so than in the past.
The new budget law also prohibits the IRS from issuing any refunds prior to Feb. 15 of any upcoming tax years. The refund delay is an added way to help the IRS combat tax fraud by beefing up its efforts to authenticate taxpayer filings. The thinking is that the extra days will provide the IRS with time to process the simultaneously sent W-2 and 1099 forms from employers/payers before issuing refund to taxpayers.
We’ll be getting in touch with all our clients this year and encouraging them more than ever to obtain the W-9 information from vendors during the year, rather than waiting until the following January. This is good practice for a few reasons:
- Often vendors mistakenly think when they receive their check that it’s somehow “under the table”. By requiring them to fill out a W-9 before they receive their payment, they understand that it is taxable income and aren’t surprised later on.
- Some vendors simply try to avoid giving you their information after year-end, thinking that if they’ve changed their address, neither you nor the IRS can find them. By requiring them to fill out a W-9 before they get their check, you’re helping to keep them and your client honest and out of trouble.
- Sometimes clients don’t realize that a vendor qualifies as a 1099 contractor. By reviewing their books throughout the year, we can give them a heads-up sooner rather than later.
Make it a practice to provide W-9s to your non-incorporated vendors who provide services before they receive their first check, even if you think a) they might be incorporated (remember, an LLC is NOT a corporation), or b) they won’t break the $600 limit. There’s no harm in having it on file, and it might save you a lot of trouble down the line.