Ownership for Form W-9 and Form 1099 Administration
As a part of government compliance requirements in the United States, reporting for Form W-9 (Request for Taxpayer Identification Number (TIN) and Certification) and Form 1099 (Miscellaneous Income) crosses multiple functions, including Master Data, Purchasing, Accounts Payable, Tax, and General Accounting. With so many functions involved in the process, there is often no clear owner of the overall process or agreement on whom should handle the printing and mailing of the documents, ensuring compliance with tax laws, or sending payments to the Internal Revenue Service (IRS).
In order to gain a better understanding of this issue, a recent research study using Peeriosity’s iPollingTM technology was carried out within Peeriosity’s Accounts Payable (P2P) research area that specifically looked at where responsibility resides for the administration of these two important forms at our member companies. Looking first at the administration of Form W-9, while Accounts Payable has traditionally played the primary role in this type of activity at most companies, and still does in this survey at 51%, the Master Data organization is now making significant headway in the oversight of this process, with 33% of the companies placing responsibility for that role with that area of the company. In addition, Procurement (10%) and Tax (6%) both continue to manage this role at a small minority of the companies.
Looking now at the results from the second polling question dealing with the group responsible for the actual preparation of Form 1099s, the Accounts Payable organization clearly dominates the results, with 76% of the companies having configured their process in this manner. This is not surprising, since much of the expertise regarding the payment of vendors reside in that organization, which is the key component of 1099 reporting.
Reviewing the rest of the results for this poll question, the Tax Department fulfilled the Form 1099 preparation role at 17% of the companies, with 7% having the Master Data organization do so.
In summary, while there appears to be a significant shift within companies to having the Master Data organization administer the Form W-9 process instead of Accounts Payable, this trend does not appear to be impacting the responsibility for the actual preparation of Form 1099.
Some of the member comments related to this poll include the following:
Consumer Products & Services Member: The actual printing and mailing are outsourced, but AP owns the relationship.
Manufacturing Member: Our Master Data team is responsible for obtaining W-9s for all new vendor setups, as well as a periodic review of W-9s on an annual basis. Accounts Payable is responsible for the 1099 process.
Manufacturing Member: Procurement is responsible for obtaining the W-9 from new and re-activated suppliers. It is the responsibility of Accounts Payable to review the W-9 for completeness and that the correct 1099 codes are set before a supplier is added or reactivated.
Healthcare, Pharmaceuticals, Biotech Member: AP is also responsible for W-8s and 1042 administration.
Non-Profit Member: Our Master Data team is responsible for ensuring that W-9s are received, but our AP team is responsible for issuing the 1099s.
Consumer Products & Services Member: The Supplier Master Data team within Accounts Payable is responsible for all aspects of W-9 compliance and 1099 reporting. We work closely with the Tax Department to ensure our processes are IRS compliant, especially since the IRS regulations change frequently.
Computers & Electronics Member: Our Vendor Master team is responsible for ensuring W9s are collected for all relevant domestic vendors. They are also the ones who submit the 1099s.
Manufacturing Member: Administration of Form W-9 should be driven by Tax as they are the ones who will make a decision on withholding ~30% tax for suppliers. Form 1099 highlights miscellaneous income. Hence, the Tax Department would have information on this subject.
Non-Profit Member: Since AP owns the vendor data, we start with strict controls around approving/validating a vendor. W-9 information (and verification with the IRS) is required for each US vendor in advance of payment. Therefore, the transactions (and their reportability) are under AP’s control as well.
Software & Internet Member: The Vendor Master team is responsible for the collection of W-9s in addition to owning the 1099 process. We found that the vendor master data is the critical piece and that the payment extraction is perfunctory. We have a third party prepare the 1099s based on the data we provide.
Where does the responsibility for the reporting and compliance of Form W-9 and Form 1099 reside at your company? Would it possibly be more effective to have these processes located elsewhere within the company?
Who are your peers and how are you collaborating with them?
“iPollingTM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility to all respondents and their comments. Using Peeriosity’s integrated email system, Peer MailTM, members can easily communicate at any time with others who participated in iPolling.
Peeriosity members are invited to log into www.peeriosity.com to join the discussion and connect with Peers. Membership is for practitioners only, with no consultants or vendors permitted. To learn more about Peeriosity, click here.