Do nonprofits need to collect W9 forms for every vendor purchase to track $600 threshold?

But what if we don't realize we've hit $600 with a vendor until after the fact? Wouldn't we be liable for not having the W9 on file already? That's probably why the finance department wants them upfront.

That's a good question. If you exceed $600 with a vendor and don't have a W9, you're not automatically in trouble. You can still request the W9 after you realize you've hit the threshold. The IRS understands this happens. If you can't get the W9 after multiple attempts, you may need to implement backup withholding on future payments, but that's a separate process. The key is to show reasonable effort to comply once you know you've reached the threshold. The finance department is being extremely cautious, but it's creating an unnecessary administrative burden that no functional nonprofit operates under.

Does it work with QuickBooks or other accounting software? We use QB Online and I'm wondering if it can just pull the data automatically rather than us having to upload things.

I'm skeptical about adding yet another software solution. How much setup time does it require? Our staff is already overwhelmed with systems.

Yes, it integrates directly with QuickBooks Online and several other accounting platforms. You can set up automatic syncing so there's no manual uploading needed. It pulls vendor data and transaction history to track spending patterns. The setup is pretty straightforward - took us less than an hour. I understand the concern about adding more software, but this actually reduced our overall workload substantially. The time saved by not chasing unnecessary W9s far outweighs the minimal setup time. Our program staff were genuinely relieved when we implemented it.

How exactly does this work? I thought it was impossible to get through to the IRS these days. Our accountant says she's given up trying to call them about anything.

Yeah right. There's no way to skip the IRS phone queue. Sounds like a scam that will just take your money and leave you on hold anyway.

It uses a callback system that continuously tries to connect with the IRS for you. When you sign up, you specify which department you need to reach, and their system keeps dialing until it gets through. Then it calls you and connects you directly to the agent. I felt the same way - our accountant had given up on calling too. The way it works is their system essentially waits on hold so you don't have to. I was definitely skeptical at first, but it genuinely worked. I specified I needed help with 1099 reporting requirements for nonprofits, and when they called me back, I was connected to someone who answered all our questions about the W9 collection requirements.

That sounds like a reasonable middle ground. Do you have any recommendation for how to track when we're approaching the $600 threshold with vendors where we didn't collect W9s initially?

Most accounting software can run vendor payment reports that will show year-to-date totals. I recommend running this report monthly or quarterly to identify vendors approaching the threshold. For smaller nonprofits without robust accounting systems, even a simple spreadsheet tracking vendor payments can work. The key is regular monitoring rather than trying to predict every possible vendor relationship from the start. Remember that the $600 threshold is about reporting requirements - you're not penalized if you exceed it and then collect the W9. The goal is making a good faith effort to comply with IRS regulations while maintaining operational efficiency.

I've run into this a few times. For reluctant vendors, I explain that it's a standard IRS requirement, not something unique we're asking of them. I also emphasize that we need it to continue doing business with them. Sometimes showing them a blank W9 form helps - it only asks for information they already provide to customers (name, address, EIN). For the truly resistant ones, we've occasionally had to find alternative vendors. Better that than dealing with IRS issues later.

Thanks for the advice! I like the idea of showing them the actual form first. You're right that it's pretty basic info they already give out. Maybe I'll create a simple handout explaining the IRS requirement for vendors who seem confused. Our issue is usually with small local businesses who don't deal with this often, not the bigger companies.

This two-tier approach sounds really smart! I'm curious about your Excel tracker - do you have it set up to automatically pull data from your accounting system, or do you manually update it each quarter? We're trying to find the right balance between automation and simplicity for our small team. Also, have you found that the $300 threshold gives you enough lead time to collect W9s before hitting $600? I'm wondering if that buffer is sufficient or if we should set it even lower to account for sudden large purchases.

@c65f4899104a Nathan, I love this two-tier approach! As someone who's been wrestling with this exact issue, your system sounds much more practical than what we've been trying. Quick question - when you do your quarterly reviews and find a vendor approaching the threshold, have you ever had situations where they refuse to provide the W9? And if so, do you just stop using that vendor or is there another workaround? Also, for the Excel tracker, are you manually categorizing which vendors fall into the "expected over $300" category, or do you have some criteria that help determine this automatically? We're trying to figure out the best way to predict which vendor relationships will grow over time.

@c65f4899104a This two-tier system makes so much sense! I'm actually kicking myself for not thinking of this approach earlier. The $300 buffer threshold is brilliant - gives you plenty of time to collect W9s without the panic of realizing you've already hit $600. I'm curious about implementation though - when you set up a new vendor relationship, how do you decide whether they fall into the "likely to exceed $300" category? Is it based on the type of service, initial contract value, or do you have other criteria that help you make that determination upfront? Our challenge has been that some vendors start small but then we end up using them more frequently than expected. Your quarterly review system would definitely catch those cases, but I'm wondering if there are any red flags or indicators you've noticed that help predict which vendor relationships might grow over time.

@c65f4899104a Your two-tier system is exactly what we needed to hear! We've been struggling with the same issues and your approach sounds much more sustainable than our current mess. For our Excel tracker, we're thinking of setting it up to pull monthly vendor totals from QuickBooks and then flag anything over your suggested thresholds. Have you found that quarterly reviews are frequent enough, or do you ever get surprised by vendors who jump from $400 to over $600 in a single month? Also, I'm wondering about seasonal vendors - like if we use a landscaping company heavily in spring/summer but barely at all the rest of the year. Do you adjust your tracking frequency for vendors with irregular payment patterns, or does the quarterly system catch those situations reliably? Thanks for sharing such a practical solution - this thread has been incredibly helpful for getting our finance team to see reason!

@c65f4899104a This is such a practical solution! I'm definitely going to propose this two-tier approach to our board. One quick question - do you find that vendors are more cooperative about providing W9s when you explain it's part of your standard process for vendors over a certain threshold, rather than asking for it reactively after they've already hit $600? I imagine it comes across as more professional and less like you're scrambling to catch up on compliance. Our current ad-hoc approach makes us look disorganized when we suddenly ask established vendors for paperwork they've never heard us mention before.

@c65f4899104a Thanks for the detailed breakdown of your two-tier system! To answer some of the questions others have asked - we set up our Excel tracker to manually pull quarterly data from QuickBooks, which takes about 30 minutes every three months. The $300 buffer has been sufficient in most cases, though we did lower it to $250 for a few vendor categories where spending can spike quickly (like IT services or emergency repairs). For vendor categorization, we typically flag any service contracts, recurring suppliers, or vendors where the initial purchase is over $100 as "likely to exceed $300." One-time small purchases (under $50) rarely make it to that level. You're absolutely right that explaining the W9 requirement upfront as part of our vendor onboarding process gets much better cooperation than asking retroactively. Vendors appreciate the transparency and it positions us as organized rather than scrambling. The seasonal vendor issue is a good point - we do run an additional mid-summer check for landscaping, HVAC, and other seasonal services to catch those irregular patterns. Has saved us from a few surprises!