The end-of-the-year wrap-up for 2019 is fast approaching. Of particular importance is the 1099-MISC form. You are required by IRS regulations to send a form 1099-MISC to any independent contractor/non-corporate entity who has earned $600 or more in a calendar year so they can include it on their income tax return.
As a small business owner, over the course of a year, you might have hired independent contractors and non-corporate vendors to assist in your company’s operations. While it’s not uncommon to do this, it is imperative that you send the 1099 form to the entities or individuals whose tax classification is individual/sole proprietor/single member LLC or partnership. You will also send 1099s to all attorneys you paid in 2019.
While it may seem like a complicated procedure to issue these 1099s, it can be straightforward with processes in place:
- Collect a filled out W9 form from each applicable 1099 contractor that is already in service and has not currently submitted a W9 form during the year. Best practice — do this step throughout the year each time you hire an independent contractor/non-corporate entity and prior to writing the first check for payment and then you don’t have to scramble come year-end.
- Applicable vendors include:
- Any contractor that provides services. This includes business entities set up as an INC. Even though a company may be an INC or may not meet the $600 threshold, their form still needs to be on file for future reference or in case of an audit.
- Any 1099 contractor that is a sole proprietorship or an LLC filing as single/multiple member and that meets the $600 threshold. This includes landlords/property management companies.
- Do not take NO for an answer. (This is why it’s so important to obtain W9 forms prior to engaging services and before the first invoice is paid.)
- An exception to not having to send a 1099 form to Independent Contractors is if you paid them via PayPal or credit card. If other payments were made to the vendor in addition to credit card payments and it meets the $600 threshold, these should be reported.
All 1099-MISC forms must be postmarked or electronically submitted by January 31, 2020 to each individual vendor and to the IRS.
If you need any help understanding the 1099 or W-9 requirements or setting up a process, Accounting Simplified is available to assist you. Give us a call at (407) 862-2007 or email email@example.com