XBert Type: Standard
Accounting Software: Xero
Country Restriction: the United States only
Risk Type: Tax Risk
Business Function: Contacts
Overview
This XBert finds US-based suppliers you have paid more than $600 during the financial year who do not have a valid Employer Identification Number (EIN) recorded against their contact. A missing or wrongly formatted EIN can hold up your 1099 reporting to the IRS, so catching it early keeps your year-end filing on track.
What it does
XBert looks at the suppliers you have paid through bills during the current financial year and checks the tax reference (EIN) saved on each supplier's contact record. It focuses on suppliers connected to your 1099 reporting and compares the amount you have paid them against the IRS reporting threshold.
For each affected supplier it checks for:
A missing tax reference (no EIN recorded).
A tax reference that is not in the correct format (an EIN should be exactly nine digits).
Where it is helpful, the alert also notes related details, such as a blank country on the contact or whether the supplier sits in a 1099 group, so you have the full picture when you go to fix it.
How it works
XBert adds up what you have paid each 1099-related supplier during the financial year, counting only bills that are marked as paid and that have a payment dated within the year. If the total paid to a supplier is more than $600, XBert then checks that supplier's EIN.
The alert is raised when the EIN is either missing or not in the valid nine-digit format. It deliberately ignores suppliers you have paid $600 or less, because they sit below the IRS reporting threshold.
It also avoids false alarms for genuinely overseas suppliers. If a contact has a country set to somewhere other than the United States and the only issue is that the tax number does not match the US nine-digit format, XBert leaves it alone, recognising that a non-US business will use a different style of tax reference.
Example/Use Case
John from John's Appliances sets up a new supplier, ACME Supplies LLC, to pay for a delivery. At the time he could not get the business's tax reference number, and because it was not needed to make the payment, he made a note to follow up later. John forgot.
Over the financial year, John's Appliances pays ACME Supplies LLC $4,250 across several bills, all marked as paid. Because that is well over the $600 threshold and there is no EIN on the contact, XBert raises this alert. John reaches out to ACME, obtains their nine-digit EIN, and adds it to the contact record, so when 1099 reporting comes around the supplier is ready to file and there is no risk of an IRS penalty.
Accounting software
This XBert is compatible with:
Xero
Which countries it supports
This XBert is designed for use in the United States only.
Processes
This XBert falls under the Cleanup business area. To resolve it:
Open the flagged supplier's contact record in your accounting software to review their details.
Check whether an EIN is recorded and whether it is a valid nine-digit number.
If the EIN is missing or incorrect, contact the supplier to request the correct number. You can confirm EIN requirements and how a business applies for one on the IRS Employer Identification Number page.
Update the supplier's contact record with the correct EIN, and add the country if it is blank.
Once the details are corrected, mark the XBert as resolved.