1099’s can be a bit overwhelming for business owners. When do I send them, at what time of year, how and to who? It is easier than you think. These tips may help.
Who requires a 1099?
A basic rule of thumb is you must issue a 1099-Misc to each person you have paid $600 to in rents, services (including parts and materials), prizes and awards or other income payments. 1099 is not used for personal purposes. Businesses are required to issue 1099-Misc for payments it made and this will be sent to a sole prop., LLC, or LLP, or Estate. You will see why I didn’t include a corporation.
What are the penalties for not sending them?
Do you really want to find out? The penalties can range from $30-$100 per form depending on how long past the deadline you go. If the business were to intentionally disregard, this is a $250 fine per statement with no maximum. Do yourself a favor and get them out.
What are the expectations?
The list is a long one, but you wont need to send them to sellers of merchandise, freight, and, storage. If you make rent payments to real estate agents, there is no 1099 required. You also don’t have to send them to corporations.
Why the W-9 is important
Business owners should always, always, always get a W-9 from the vendor even if they don’t pay over $600. The vendor will have the Tax ID and address on their W-9 for easy tracking. Something else on the W-9 is the vendors company formation.
What are the deadlines?
Just like your W-2 employees, 1099 must be mailed out by January 31. You also have a 1096 transmittal form due February 28. The 1099 may also be applicable to state filing, check with your state.