Tips and Requirements You Must Know About Your 1099 Tax Form
It’s that time of year again! Time to start preparing, sending out and filing 1099 forms. Here are some tips & requirements to keep in mind (and remember, this only applies to business owners or payments made in the course of your trade or business):
$600 is the sweet starting point.
You are required to send vendors or subcontractors a Form 1099 if you paid them more than $600 in total during the year with some exceptions (detailed below).
Form W9 is your friend - collect these throughout the year.
Form W9 tells you about your contractor and provides you, as the business owner, important information including their name or the name of their business, their business identification number and the type of business entity they are running (LLC, Sole Proprietorship, Partnership, etc.). Form W9 should be collected from each contractor and should be kept with the other files & records of the company, often we suggest collecting a W9 from your vendors/contractors before paying them.
1099’s are due no later than January 31.
1099s must be sent to contractors no later than January 31. 1099s must also be sent to the IRS for their records, though the deadline is later than January 31.
There are exceptions to every rule.
Exceptions abound with 1099’s. Most commonly, you don’t need to issue 1099’s to any vendors operating as a C or an S-Corp. Lawyers are the exception to this exception, however as the IRS requires you issue Form 1099 to any Lawyer who you paid more than $600 even if they are incorporated and taxed as a C or an S-Corp. You also do not need to issue 1099s for any payments paid through credit card and PayPal (they will issue their own 1099 to the vendor/contractor). This is not an exhaustive list — many exceptions apply to the general rule.
If in doubt, send it out.
There are penalties for non-filing of 1099s - up to $100 for each 1099 so it is best to connect with your tax preparer or accounting team to make sure you are in compliance. There is no penalty for filing a 1099 that didn’t need to be filed, so if you’re ever in doubt, just send it out!
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