The 1099 tax form can be daunting and lead many business owners to avoid itself. Avoiding it can bring many penalties and interest fees. This should help you figure out what to include and how to fill it out.
Q: Who is required to fill out a 1099?
A: All businesses (including sole proprietors) that pay more than $600 in a tax year to a vendor or subcontractor must file a 1099 for each vendor/subcontractor. This includes individuals and businesses unless that business operates as or gets taxed as an S-Corp or C-Corp.
- Landlord: Yes, it is required that you send your landlord a 1099 form.
- Credit Card company: No, they are an exception to this rule.
- Lawyer: Yes, even if it is an incorporated law firm the government requires you send them a 1099.
- Third-party payment companies: No, you don’t need to send a 1099 to companies like PayPal, Venmo, and Zelle if your company paid >$600 through them.
- Self-employed contractor: Yes, they need to be sent a form 1099.
Q: How to fill out a 1099?
A: The biggest piece of advice we have for filling out a 1099 is to make sure you get a W-9 from each vendor. A W-9 will give the vendor’s mailing information, Tax ID number, and indicate if they are taxed as an S-corp or C-corp. A W-9 is specific to each vendor and can be obtained through asking the vendor. To be proactive, ask for this document the first time you start doing business with a vendor, that way you have their contact information ready when you have to file.
Q: Where do I get this 1099 form?
A: Unlike many of the other IRS tax forms, this form cannot be downloaded and printed from the IRS website. Instead, a business must request these pre-printed documents from the IRS. Or you can create individual ones online here. There are also a few online services including Track1099.com and Tax1099.com.
Q: When is the deadline to file a 1099?
A: This is a trick question because there are actually two different deadlines to file this form. The first deadline is for the last date a business has to send their 1099’s to their vendors. The second deadline involves the last day that a company has to gather all of their 1099’s and submit them to the IRS. Both of these things must be done by Jan. 31st. (If you have more than 250 forms to file, you MUST file electronically.)
Note: Form 1099-Misc also has a Jan. 31st deadline starting 2018, changing from Mar. 31st in previous years.
Q: Does my company bookkeeper know how to do this?
A: Although they may know about the 1099 form, it is best if you seek guidance from a CPA. There are certain rules depending on which state you’re located in and who your “vendors” are that can add extra complexity. An example of this is that you are also required to submit a 1096 form and possibly a 1099-Misc form. Also, foreign workers who have been paid by your company make up a special case of “vendor”. A CPA will know these different rules and will be able to help your business file correctly.
Q: What happens if my business doesn’t complete a Form 1099?
A: Remember that this form is only necessary if a business pays more than$600 to a vendor. However, if this is you and these forms aren’t completed then your business can be hit with many fines. The IRS is getting more strict about making sure businesses file 1099. Penalties are now $260 for each vendor you don’t provide a 1099 to by the deadline, and/or $100 for each vendor if the form is filed late to the IRS. If the IRS convicts a business of intentional disregard then an additional $530 fine per return can be added. Details of IRS “Information Return Penalties” can be found here.
Q: What if my business doesn’t have enough time to do this?
A: ALOEwerx provides a painless accounting service which includes 1099s. We can distribute and file all 1099’s for you. Not only do we do all your bookkeeping and accounting needs, but we will take care of the tax needs too.