1099 forms are due by January 31st each year. As a reminder, we don't file these forms and we leave all tax filings to your CPA and payroll service.
How we help:
In the first two weeks of January, we will be sending you a list of possible 1099 vendors and total paid during the last year. I say "possible" because some of the vendors might be incorporated (s-corp or c-corp) and may not need a 1099 filed.
Step 1. Review the list for accuracy.
Step 2. Ask the people on the list for a completed W9 form.
Step 3. Send your spreadsheet list (linked below) and completed W9 forms to your CPA to complete the 1099s due by January 31st.
People/Vendors who will need a 1099 form:
People you paid at least $600 with cash or check for services, and who are not incorporated (such as LLC's and sole proprietors) will need a 1099 form filed. You may need them to complete a W9 form to know for sure if they are incorporated or not. Some vendors may include:
Law firms (even if incorporated)
Computer IT support
Landlords for rent (yes, for rent paid)
Note: Don't file a 1099 for people you paid by credit card. For example, We are an LLC so we are not incorporated, but you pay us by credit card which means you will not be filing a 1099 for our services.
What is a W9 form?
The W9 form is what you send to the person/vendor so they can declare if they are incorporated or not and add their legal filing info like name and tax ID.
The W9 form will tell your CPA if the person/vendor is taxed as an S-Corp or C-Corp, because those entities don't need a 1099 (except Attorneys). It will also provide your CPA accurate filing information like Name, Social Security/FEIN, and address.
The only businesses that are exempt are the entities taxed as incorporated businesses such as C-Corps or S-Corps (except attorneys). You have no way of knowing unless you get a completed W9 form.
The completed W9 forms that people give you will not get sent to the IRS. However, if there is a problem with the 1099 filing, you should use the completed W9 as proof for any IRS notices. So, keep completed W9 forms for your records.
TIP: Please have vendors/temps fill out the W-9 form before you pay them during the year. It will make your life much easier come January.
How to file 1099's:
I strongly suggest having your CPA file your 1099 forms each year. The reason for this is because the IRS has recently decided to treat these forms more like payroll tax returns with interest and penalties for late filings or mistakes. Your CPA can reply to IRS notices and file amended forms.
1099 Software Option:
Another option that I used for clients in the past and really liked is a 1099 online software called Track 1099 (https://www.track1099.com/). It allows you to file amended 1099's too. You can give this a try if your CPA doesn't offer the 1099 filing service. It's fairly simple and files the 1099 electronically to both the IRS and state.
How to avoid having to file 1099 forms each year:
Charge everything to credit card:
If you want to avoid the hassle of filing and paying for 1099 forms each year, start charging everything to credit card and stop writing checks.
Use Gusto Payroll or your payroll service:
Temps and associates can also be paid through your payroll service to get the 1099 automatically filed. Gusto is awesome for contractor payments.