W-9 Form Automation

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The Requirement for a W-9 Form

One of the more painfully manual processes in the accounting department is sending a W-9 form (Request for Taxpayer Identification Number and Certification) to suppliers, as well as tracking forms that have been completed and received from suppliers. The traditional approach is to mail a blank form to each new supplier, along with a cover letter asking that it be completed, and then store all returned forms alphabetically.

Alternatives for W-9 Form Automation

The IRS provides the following guidance in regard to the automation of W-9 forms: “Requesters may establish a system for payees and payee’s agents to submit Forms W-9 electronically…” The requester must make reasonably certain that the person accessing the system and submitting the form is the person identified on the W-9. Also, the IRS requires an electronic signature by the payee that authenticates and verifies the submission.

In ascending order of automation, here are some alternatives for automating the W-9 process:

Include in credit application. The W-9 can be integrated into a credit application package, as long as the form clearly states that the W-9 signatory is not also approving of other demands listed elsewhere in the credit application. This tends to increase the W-9 response rate, but is still an entirely manual solution to the problem.
Fax transmission. This is the approach used by nearly everyone – fax the form and cover letter to the supplier, and hope it is faxed back. This approach eliminates the mail float associated with the traditional approach, but does not ensure that all fields are completed, does not result in an electronic record, and provides no automated method for tracking who has not returned a completed form. Still, it is sufficient for companies with just a few suppliers.
E-mail a PDF of the form. You can go to the IRS web site at www.irs.gov, click on the “More Forms and Publications” link on the left side of the page, locate the IRS’ official W-9 form in PDF format, and download it. Then e-mail it to suppliers. This approach will hopefully get the W-9 to exactly the right person, but still does not yield an electronic record or ensure that all fields are completed.
E-mail an electronic form. If you own Adobe Acrobat Professional, you can create an electronic form that can be e-mailed to suppliers, and which requires that all fields be completed. It can even by programmed to download the resulting information back into your corporate systems, though this takes some effort.
Direct suppliers to an electronic form. Create an electronic W-9 form on the company web site, and direct suppliers to it. It will be necessary to issue a password to the supplier to ensure that an authorized person is completing the form. This approach does it all – it ensures that all fields are completed, creates an electronic record that can be easily integrated into internal systems, and reports on missing W-9 forms can be easily generated. The main problem is a considerable amount of custom programming, so it is only cost-effective for companies dealing with a large number of suppliers.

Podcast

A discussion of accounts payable best practices is available on Episode 81 of the Accounting Best Practices podcast. Listen Now.