XBert Type: Standard
Accounting Software: Xero
Country Restriction: the United States only
Risk Type: Compliance Risk
Business Function: Contacts
Overview
This XBert checks the supplier contacts you pay as contractors or vendors and finds the ones missing a valid US tax reference (an Employer Identification Number, or EIN). When several suppliers are affected, XBert groups them into a single summary so you can clean them up together before tax-reporting time. Getting these right helps you meet IRS 1099 reporting requirements and avoid penalties.
What it does
XBert looks at the suppliers you have paid during the financial year and compares the amount paid against the tax reference held on each contact record. It focuses on suppliers linked to your 1099 reporting group and the expense accounts those suppliers are billed against, then checks whether each one has a complete, correctly formatted EIN. It also notes supporting context, such as whether the contact has a country recorded and whether other suppliers are billed to the same accounts.
How it works
XBert raises this XBert when more than five US-based suppliers are missing a valid tax reference. (If five or fewer are affected, you will instead see a separate XBert for each individual contact.)
A supplier is flagged when both of the following apply during the financial year:
The total you paid that supplier is more than US$600. XBert only counts bills marked as paid, and only payments dated within the financial year.
The tax reference on the contact is either missing, or not in valid EIN format. A valid EIN is a nine-digit number, so anything blank, too short, too long, or containing letters is treated as incorrect. Dashes are ignored, so a hyphenated EIN is still accepted.
XBert deliberately ignores some cases to avoid false alarms. Suppliers you have not actually paid, bills that are not yet paid, payments outside the financial year, and small suppliers paid US$600 or less are all left out. If a supplier has a country recorded that is clearly not the United States and the only issue is the format of a foreign tax number, XBert does not flag it, because a non-US supplier would not be expected to hold a US-style EIN.
Example/Use Case
Maria runs the books for John's Appliances. Over the year she sets up several new contractor and vendor contacts in Xero so she can pay their bills quickly. One of them, ACME Supplies LLC, sends an invoice before Maria has its EIN on file. The payment does not need the tax number, so she pays the US$4,200 bill and tells herself she will chase the EIN later, but she forgets. The same thing happens with seven other suppliers through the year.
At tax time, XBert raises this grouped XBert showing eight US suppliers, each paid more than US$600, with missing or invalid EINs. Without it, Maria would only have discovered the gaps when preparing the 1099 forms, risking late filing and IRS penalties for John's Appliances. Instead she works through the list, requests the missing EINs, and updates each contact before the deadline.
Accounting software
This XBert runs on:
Xero
Which countries it supports
This XBert is available for organisations in the United States only.
Processes
This XBert falls under the Cleanup business area. To resolve it:
Open the grouped XBert to see the list of affected suppliers, the amount paid to each, and what is missing or incorrect.
For each supplier, open the contact record in Xero and check the tax reference (EIN) field.
Where the EIN is missing or invalid, ask the supplier for a completed Form W-9 so you have their correct EIN on file.
Enter the correct nine-digit EIN on the contact, and make sure the country is recorded as the United States.
If you find a flagged supplier is not actually a US contractor or vendor that needs 1099 reporting, record their correct country so they are excluded.
If you are unsure whether a supplier needs an EIN, the IRS Employer Identification Number guidance explains the requirements.
Once the contacts are corrected, mark the XBert as resolved.