W-9s, 1099s, and the “Please Don’t Make This a January Fire Drill” Problem

If your law firm has ever hit January and suddenly realized you’re missing vendor tax info, you’re not alone. It’s one of the most common (and most avoidable) compliance scrambles we see: the frantic hunt for W-9s, the question of who gets a 1099, and the creeping fear that “we’ve never been caught before” might not be a strategy you want to test.

At The Proper Trust, LLC, we work with law firms who want their books clean, their workflows consistent, and their compliance handled proactively—not as a last-minute miracle.

Let’s talk about what matters most: why W-9s matter, what happens when you don’t have them, and how to build a simple process that protects your firm.

What a W-9 actually does (in plain English)

A W-9 is how you collect a payee’s tax identity: their legal name and taxpayer identification number (TIN). That’s it. But this simple form carries a big purpose:

It protects your firm from being required to withhold a portion of payments to that vendor.

In the conversation, Jeff Pronin (a long-time 1099 compliance expert) put it bluntly:
If you don’t have the proper tax identity on the person you’re paying, the IRS expects you—as the payer—to withhold a significant percentage of their payments and send it to the IRS.

That’s a strong motivator when a vendor is “too busy” to send a W-9.

The real risk isn’t “the form” - it’s what happens without it

Here’s where law firms get burned:

1) Missing W-9s create withholding obligations

If your firm pays someone and doesn’t have a valid tax identity, you may be required to withhold on payments going forward until the issue is fixed. Practically speaking, vendors get very cooperative when they learn their invoice will be short-paid.

2) Incorrect name/TIN combos trigger IRS notices and penalties

If you file a 1099 with a mismatched name and TIN, you can receive a notice (commonly referred to as a B-notice / CP2100 series). This can lead to:

• Penalties per form

• A requirement to start backup withholding on future payments to that vendor unless corrected

3) “We’ve never been caught” can become “intentional disregard”

This is the part attorneys should not brush off.

If a firm knows it’s supposed to file and chooses not to, Jeff emphasized that it can be treated as intentional disregard - a category with much harsher penalty exposure than “we tried, but made a mistake.”

Lawyers understand risk. This is risk.

Do you need a new W-9 every year?

Usually, no.

W-9s don’t generally “expire.” You typically need an updated one if something changes:

• Business name changes

• Entity type changes

• Tax ID changes

But the practical standard we recommend for law firms is simple:

• Get it before the first payment

• Store it securely

• Make it part of vendor onboarding so it’s never “a January thing”

The law firm workflow that prevents the January panic

This is the best part: you don’t need a fancy system to be compliant—you need a repeatable one.

Here’s the process we help firms implement:

Step 1: Add W-9 collection to vendor onboarding (non-negotiable)

Any time you add a new vendor - investigator, expert, transcription, marketing, IT, contract paralegal - your onboarding checklist should include:

• W-9 requested and received before payment

• Vendor contact info confirmed

• Payment method confirmed

If you want fewer headaches, this step is sacred.

Step 2: Centralize storage (and don’t keep it in someone’s email)

W-9s contain sensitive data. They should be stored in a secure location with limited access—not buried in inboxes or attached to random QuickBooks transactions.

We typically recommend a structured folder system or a secure portal/workflow tool so retrieval is instant at year-end.

Step 3: Track payments throughout the year

If you wait until January to figure out who crossed reporting thresholds, you’re setting yourself up for the classic:
“Who paid this person?”
“Do we have their info?”
“Why won’t they answer now?”

Instead, we track vendor totals throughout the year so you know:

• Who is approaching reportable thresholds

• Who is missing tax identity documentation

• What needs attention before year-end

Step 4: Treat 1099s as a defined service - not a “free add-on”

This came up clearly in the discussion: 1099 work is often underappreciated until it becomes urgent.

The cleanest approach is to define it as:

• A scoped annual service, or

• A deliverable included only when expressly engaged

Either way: clarity prevents resentment and last-minute chaos.

What about W-8 forms and non-U.S. vendors?

If your firm pays a non-U.S. person or business, the tax reporting world changes.

Instead of a W-9/1099 flow, you’re usually looking at W-8 forms and potentially a different reporting system (and often withholding rules), depending on the situation and treaty eligibility.

Translation: if you’re paying overseas contractors, marketing, admin support, tech help, this is a “slow down and do it right” area.

This is exactly why we encourage law firms to route vendor setup through a consistent workflow with a bookkeeping partner who will flag these situations early, not after the money has gone out the door.

Want help tightening your vendor compliance workflow?

If your firm:

• Doesn’t consistently collect W-9s before payment,

• Has vendors that are hard to track,

• Or wants a smoother, documented process for year-end…

We can help you build a system that’s simple, repeatable, and audit-resistant.