It was December 31, 2018, and Jill and Bob were standing in Times Square, waiting for the big crystal ball to drop, blissfully celebrating another successful year of business together. In that moment, they did not imagine that one month later, they would be running around their office in full-blown panic mode. The reason: Jill and Bob had to file 1099 forms by January 31st, and were not prepared.
Hearing about Jill and Bob’s unexpected stress may leave you wondering, “Do I need to file 1099s?”
If you are unsure about 1099s, the 5 Minute Bookkeeping team is here for you. In this post, 1099 Most Popular Questions and Answers, you learn how to get ready for 1099 season without the stress that poor Jill and Bob endured.
What is a 1099?
A 1099 form is a tax form that you provide to certain vendors, to report how much you paid them during the past year. The vendor receiving the 1099 form needs it in order to file their income tax return with the IRS.
Which vendors need a form 1099?
Any vendor who performed services for you within the calendar year may need a 1099, if they meet the criteria set by the IRS. These include…
- Freelance workers
- Anyone who is not an employee
If you’ve paid $600 or more in compensation to contractors, sub-contractors, freelance workers, attorneys, or other non-employees in the prior year, you may need to provide them with Form 1099-MISC and report the payments to the IRS. Here is a link to the IRS’s website for all the details on 1099-MISC.
Do my employees need a 1099?
Generally, the answer is NO. If an employee’s income is reported on a W-2, there is no need for them to receive a 1099.
Sometimes the difference between an employee and a 1099 vendor is not so clear-cut. For example: you may have a contractor who does work for you on a regular basis (perhaps even daily), and your relationship with that contractor has existed for many years. Under these circumstances, it may be tempting to call that contractor an employee.
If you need more help understating the difference between a contractor and employee, the be sure to read these two blog posts:
Do you have to give a 1099 to a corporation?
The answer is generally “No”, with some small exceptions. Most payments to corporations don’t require you to file a 1099. However, there are a few exceptions. Payments to corporations for the following services do require you to issue a 1099:
- Medical and health care payments
- Fish purchases for cash
- Attorneys’ fees
- Gross proceeds paid to an attorney
- Substitute payments in lieu of dividends or tax-exempt interest
- Payments by a federal executive agency for services
For more information see the IRS website
Do you have to give a 1099 to a contractor paid by credit card?
The answer is “No”. If you’re paying an independent contractor with a credit card, you don’t need to issue them a 1099. However, the independent contractor will still receive a form 1099, but it will be issued to them by the credit card company.
Do you have to give a 1099 to contractors paid by a 3rd party payment platform (like PayPal)?
The answer is “No”, you don’t need to issue a form 1099. Instead, the contractor will receive a form 1099 from the 3rd party payment platform.
According to the IRS website: Payments made with a credit card or payment card and certain other types of payments, including third-party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC. See the separate Instructions for Form 1099-K.
What documents do I need to file 1099’s?
You will need to obtain a W-9 form from all of your vendors who are independent contractors. But what if the vendor doesn’t give you a W-9 form? Tell them that you can’t pay them until you receive a completed W-9 form. I can assure you that they’ll respond promptly.
How do I file 1099’s?
The process of filing a 1099 can’t be accomplished in just one step. There are several things you need to do. Here is a checklist:
Can I file 1099 forms online?
Yes you can. It’s simpler to file using these e-services than using QuickBooks Online. We recommend using these services:
What is the 1099 filing deadline?
The 1099 filing deadline is January 31, 2019. The IRS decided to change the deadlines for filing 1099 forms and essentially shortened the filing season by one month. That means that there is absolutely no time to waste. Be aware of filing deadlines so that you don’t incur any penalties. Here is a link to the IRS website listing all of the potential penalties you can incur for filing forms late.
The 1099 deadline is fast approaching, but there’s still time. As long as you have W-9’s from your independent contractors and you have tracked how much you paid them for the year, you have everything you need to start working on getting those 1099’s filed. I hope you’ve found 1099 Most Popular Questions and Answers to be helpful. Best wishes and good luck to you.
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