Even though the IRS keeps revising the W-9 form (the latest version dated October 2018), Accounts Payable (AP) professionals know that the form needs to be collected in order to add a new vendor or in some scenarios, to update existing vendors. And, according to a recent survey by an AP Solutions company, more than two thirds of AP professionals are validating the Legal Name and Tax ID on the W-9 by performing an IRS TIN Match.
What’s more, vendors know the IRS Form W-9 is a requirement when they do business with a new client. They will provide and even prepare it in advance anticipating the ask.
So why would your company want to take advantage of the IRS acceptance to develop and use your own Substitute Form W-9? One reason - Information.
Collect More Information
Addresses – the IRS Form W-9 includes one address, the address where the 1099 will be mailed. If there is a different remit address, a Ship From, etc a Substitute Form W-9 can capture those addresses. This is especially beneficial if the address on the IRS Form W-9 is a PO Box, which can be a red flag for a fraudulent vendor, so you can also require and collect a physical address.
Contact Information – Collecting contact information and email addresses are critical for future authentication and confirmation of changes. Collecting on one form consolidates what can be a manual effort to search for this information on invoices, contracts, at the time of vendor setup.
Diversity Information – Vendors can self-identify or indicate if they have been certified based on socioeconomic factors such as Veteran-Owned Business, etc. This information can be used for diversity and inclusion reporting.
D&B (Duns) Number – This Dun and Bradstreet number can be used for Supplier Risk monitoring during or after the vendor onboarding process. It can also be used to identify Parent Company and it’s hierarchy.
Insurance Company Information – If your vendors are required to be insured, request the insurance company information to request the Insurance Certificate.
Industry Codes – Collect the Primary North American Industry Classification System Code (NAICS) or the Standard Industrial Code (SIC). This information can be useful in reports for the Sourcing or Procurement groups.
Company or Industry Specific – Do you require ISO Certification? Add it.
Collect the Most Updated Information
Some vendors will create a W-9 on the most current version, with the current company structure. Two years later, it’s been copied from copies and can be illegible or worse, does not reflect a name change a year before, but your contact is unaware and submits that same copy. The back and forth when the IRS TIN Match is not successful would have been avoided with the Substitute Form W-9. For existing vendor changes, this form can force the review of the original data collected versus a resubmit of the original IRS Form W-9 used for the original setup.
If you already have a separate Vendor Add/Change Form that is collected along with the IRS Form W-9, consider carefully if you can combine them to one. If your collection process for the IRS Form W-9 is separate in order to protect vendor sensitive data (Tax ID that could be SSN), then you don’t want to combine the forms. Or if you have a vendor self-registration portal that generates a Substitute Form W-9, and maybe collects some of the additional information, keep the forms separate.
If you decide a Substitute Form W-9 if right for you, ensure you incorporate the IRS certification requirements related to the signature, etc: https://www.irs.gov/pub/irs-pdf/fw9.pdf.
Now that you have all this great information in your Accounting System or ERP, protect it. Implement internal controls and best practices to reduce the potential for letting fraudulent vendors or data into your vendor master file. Get my training or eGuide.
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Debra R Richardson
MBA, APM, APPM, CPRS
Debra is an accounts payable speaker, consultant, and trainer with over 20 years of experience in AP, AR, general ledger, and financial reporting for Fortune 500 companies including Verizon, General Motors and Aramark.
For the past eight years, Debra has focused on Global Vendor Maintenance, and implemented a vendor self-registration portal for 140k+ global vendors across five Accounting Systems/ERPs. In her consultancy, she focuses on internal controls and authentication to prevent fraud in the vendor master file.