W9s/1099s and You the Dental Practice Owner
The end of the year is hectic enough without having to figure out W9 forms and 1099s. Lucky for you, PracticeCFO is here to help. In this article I am going to explain step by step the process you, the practice owner should be taking each time you work with a new vendor or any non-employee.
Before we dive into the fun, let’s discuss the basics of a W9 form and a 1099 MISC. A W9 form gives us the information needed to provide both the IRS and your contractor, a year-end tax statement called a 1099 MISC. The 1099 MISC shows there was a transaction between the two parties and the money that traded hands.
Next let’s talk about who needs to fill out a W9 form and receive a 1099 at year end. The easiest answer for this is have all non-employee, non-supply companies fill out a W9. As you prepped for your dental school exams there was no such thing as too much studying, think along the same lines when it comes to having people fill out W9 forms. The more direct answer to the question is; any temporary worker, contract laborer, direct staffing agency, janitor, repairman, groundskeeper, dental lab, advertising company, lawyer, and whomever you pay rent to need to have a W9 on file.
Before I get into my rules and recommendations, what are the requirements for having someone provide a W9, and then producing a form 1099 MISC at year end? The answer to this is simple- if you paid them through your bank account, and over $600 for the year, you need to have them fill out a W9 form.
The first rule when dealing with contractors of any kind, is to have them fill out a W9 form before you pay them. You may be saying to yourself this will only be a one-time project, there is no way I’ll pay them over $600. We always say better safe than sorry. There is a good chance that one time could turn into two, or more occasions.
The second rule to live by is to try and use your credit card to pay vendors whenever possible. The pluses to this are twofold. Most importantly, all credit card companies take care of 1099 filings for you automatically at year end. Also, you earn reward points when using your credit card. That is a win-win situation.
The last important piece to remember - send in the W9 forms to your accounting team. If you haven’t had contact with them reach out to your CFO and they can make an introduction. The accounting team is here to make your W9/1099 experience as pleasant as possible and answer any questions you may have.
Now the scary part: The IRS mandates that if you pay any 1099 applicable non-employee over $600 in a year you need to have them fill a W9 form out and produce a 1099 at year end. Failure to do so can result in fines, penalties, and the loss of the expense on your tax return.
Cliff note version of this for the article skimmers; have all non-employees fill out a W9 form before you pay them and send it in to your accounting team.David Biroscak Director of Accounting