Time for 1099 Planning
The IRS needs you ... to make sure others are reporting their income correctly. There can be penalties for your business if you fail to do this correctly or in a timely manner. Just like last year, we want to help you plan ahead for those year-end must dos. For even more information, check out our 2020 blog on 1099s too!
Almost all business owners know they need to send their employees W-2s and send a copy to the IRS. What often gets overlooked, or filed incorrectly, are 1099-MISC and 1099-NEC (non-employee contractor) forms.
Who Needs a 1099?
Contractors
Service Providers (not products)
Web Design
Marketing
Lawyer
Virtual Assistant
Accountant
Any of these people who you pay more than $600 to in a calendar year likely need one. (Note that if you pay these people with a credit card, you do not need to send a 1099.)
Where Do I Get the Information to Send the 1099?
Look in your accounting system to see who you will need to send to. While some programs can help with this, the results are only as good as the data you put in.
Obtain a completed W-9 from the service provider. It is a good practice to update this every two to three years. If you cannot get a W-9 from someone, you must begin withholding from your payments to them.
Double check the name, address and ID numbers on the W-9 to your records.
Other Notes:
Do you provide services to other businesses? Help them out and proactively send your W-9.
While 1099s are not required to be sent to corporations in general, law firms always get them.
1099-NEC is now the most common form filed for small businesses. There is still a 1099-MISC for some situations, so make sure you file the correct form.
If you choose to file manually, you will need to order free transmission forms (1098) from the IRS or purchase them from an office supply store. We prefer to file online through Adams Tax.
Need help getting your accounting records in place or figuring out your 1099 obligations? Reach out to us!
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