Actually, now is the perfect time to start thinking about your taxes because you know all of the things that made your previous year’s taxes more challenging than they needed to be. Here is one thing you can do all year round that will make your life much easier come tax time.
Prepare for your 1099s!
One of the most challenging things in January is figuring out who you paid for a service, tracking them down, and getting a W9 from them. Every year we have many clients who either do not have up-to-date contact information for a vendor or the vendor refuses to send a W9. Not providing a requested W9 when it is legitimately requested is against the law, but that doesn’t stop a lot of people from dodging the request when the time comes.
To avoid this next year, do not pay anyone for a service without FIRST having a W9 form on file from them. If they want to be paid by you they must provide this form.
Keep in mind the vendors who will need a 1099 from you may include anyone (individual or company) that your business has paid for a service. This includes landlords, business coaches, advertising agencies, web designers, attorneys, accountants, repair people, and so much more! Unless you were purchasing a physical item, the vendor will probably need a 1099.
“But I thought that I only had to do a 1099 for services over $600?!?”
OK. Maybe you just paid your handyman only $400 for that job in February. You figured it’s under the threshold, so you don’t need to worry about it. Are you going to remember that in December when you contact the same service provider and that new bill adds an additional $250 to your total with them for the year? Probably not. It’s best to just make sure you have your W9’s from your vendors. Every time.
Keep all these in a file where you can find them and you will have everything you and your accountant will need for your upcoming 1099 filing.
It’s such a relief to be prepared!