Client compliance expectations

cRcDisclaimer: We take IRS rules, regulations and compliance seriously. Our clients should too.

Abacus (ASBA) employees are not here to be “nice” while you risk IRS penalties, disallowed deductions, backup withholding, or lawsuits. We are here to run accurate books that protect your business and keep both you, the client, and our firm out of trouble. “I didn’t know,” “be patient with me,” or “I’m new to this” doesn’t fly with the IRS, courts, or insurance companies. These aren’t optional preferences. They’re non-negotiable standards every legitimate business must follow.

1. W-9 & 1099 Rules – ASBA Requirements for Engagement

• Every independent contractor, vendor, or subcontractor must provide a correctly completed, current-year signed W-9 before any payment is made.
• If you are unsure if they need to provide a W-9, request it anyway. Better to have something you don’t need than not have something required.
• One W-9 per business entity only (never per person). Payments go to the business, not the individual.
• ASBA will reject forms with common errors: wrong entity box checked, EIN instead of owner’s SSN for sole props/disregarded entities, missing signature/date, blank TIN, etc.
• ASBA runs each W-9 through the IRS TIN Matching system for compliance. Anyone who throws a flag will be forwarded to you for immediate correction. Backup withholding is required for non-compliance. Additional fees apply.
• If ASBA has to chase a W-9, there is a $50 fee per request.
• No valid W-9 (or materially incorrect one) = no 1099 issued and the expense is reclassified as personal (you pay the tax on it). This is straight IRS requirement — not ASBA’s rule.
• Fillable W-9 Form
• Pinnacol Assurance Workers Compensation Coverage Waiver

2. Insurance for Contractors & Vendors – Strong Recommendation (Not A Provided Service)

ASBA does not manage, verify, collect, or track insurance for you or your vendors — that is entirely your responsibility. That said, here’s what experienced business owners do to avoid massive liability:

• Require contractors/vendors to carry current General Liability Insurance (minimum $1M per occurrence / $2M aggregate).
• Ask to be named as Additional Insured on their policy (premises for building owners, operations for service businesses).
• Request a Waiver of Subrogation in your favor.
• Get the Certificate of Insurance (COI) + actual endorsements before work begins, and renew annually. Uninsured vendors can lead to lawsuits that wipe out your business — we’ve seen it happen. This is basic risk management you should handle yourself. If you don’t, it’s on you.

3. Expense Documentation for IRS Compliance

• Every transaction needs clear substantiation: receipts, invoices, purpose, who and what and when and where.
• Responses such as “It’s all business”, “I think it was for…”, or summaries do not meet IRS rules/requirements and will not be accepted by our firm/team members. Unsupported items will be coded as personal draws/owner distributions (no tax deduction benefit).
• Bank/credit card statements alone are never sufficient for deduction support.
• ASBA does not want your receipts but recommends you have them on hand in case of audit or lawsuit.
• Recommended Mileage Log Tracker

4. Entity Separation & General Business Practices

• If you run multiple entities (e.g., operating company + property LLC), keep rent, vendor payments, bank accounts, and books completely separate. Commingling is one of the fastest ways to lose limited-liability protection and invite auditors to dig deeper for non-compliance.
• Money moves in and out through you, personally, not across companies.
• Timely responses required — delays stop progress and will trigger extra fees.

Consequences if These Expectations Are Not Adhered To...

Project delays, additional fees, disallowed deductions, backup withholding, audit exposure, or full disengagement may occur. ASBA enforces these standards because we’ve seen too many businesses (and bookkeepers) get burned by exactly the excuses/bad habits we’re preventing.

Questions are welcome — anytime. Excuses, deflection, or emotional appeals are not.

Let’s build clean, defensible books from day one.