Today, all brokers are required to issue 1099’s to anyone they paid more than $600 (when needed – link to article we wrote last year with details, or call your accountant!). A few helpful tips to start THIS year off right.
Get the W-9 Signed BEFORE: You can’t send a 1099 until you have the details from the W-9. It is a best practice for every broker to have a W-9 form filled out before handing over a check more than $600, unless to a known CORP. So, add this important document to your closing process. Need to issue a co-broke check? Consider a requirement that before payment a w-9 must be completed by any non-corp you are doing business with for the first time during the year.
- Firms should help everyone out and add LLC or Inc to your office name in Flex if appropriate!)
- Listing brokers can send the blank W-9 form in advance of a closing to the cooperating brokerage so they can make sure to have it at the closing.
- Buyer representatives should expect to be asked for this form if you’re receiving money, and provide it in a timely manner.
- Swap the commission check with the completed W-9 form in person when possible or via mail when not possible.
Keep it safe: Please do NOT ask for someone to send a W-9 via email. It doesn’t pass the wisp test (Massachusetts’s Written Information Security Protocol WISP Act). The information on this form contains both names and social security numbers or corp tax numbers – making it the perfect lil document for identity theft. Email is not secure and make sure to remember that anything with a simple name + account number means you have an obligation to safeguard it or be subject to fines starting at $10,000. Fer real. And lock the dang forms in a file cabinet when you get them. Thank you.
No number, no worries: If you discover you didn’t get the W-9 or don’t have the Social Security number or TIN (Tax ID), make sure you formally request it no later than 12/31 of the year. To maintain compliance with IRS guidelines, you must make a formal request to the subcontractor for the identification number, before the end of the year. If you still don’t have it by the time to need to file the 1099-MISC at the end of January, you should leave the identification number box empty, but still submit the report to the IRS. The IRS will send a notice stating that the number is missing. This notice must be sent along with a W-9 form to the subcontractor. They will be subject to a penalty for failure to furnish the Social Security number to you, but you will have covered your assets.
Whoopsie: Ouch. If the TIN number of a firm is not valid the IRS will reach out an tell you how to handle the situation. And when filling our your own W-9’s remember that you are signing “under the pains and penalties of perjury [yada yada] that the number is correct”. And the IRS brings pain and penalties, so take an extra sec to make sure it’s right – or fill one out, copy it a bunch of times and pre-sign them for easy delivery.
Hope that helps!