You can lay the groundwork now for a common information return known as "Form 1099-MISC, Miscellaneous Income." You use Form 1099-MISC to report payments to non-employees. The list of payments includes fees to independent contractors for services, such as consulting, web designing, accounting, and legal. Generally, you don't need to report amounts you pay to corporations, but there are exceptions. For example, you must report payments to all law firms, whether the firm is incorporated or not.
Here's
the information you need to start assembling to complete Form 1099-MISC: the
name and address of vendors you paid in the course of your business, the
taxpayer identification number of each vendor, and verification of corporate
status. The best way to collect this information is to use "Form W-9,
Request for Taxpayer Identification Number (TIN) and Certification." Send
a copy to all vendors and ask them to complete and return the form to you. When
you get the form back, keep it with your records. The IRS doesn't need a copy.
In
order to save time in the future, establish a policy to request Form W-9 from a
new vendor whenever you sign a contract.
