And 7 things that are good to know
1. It's the law.
This could be the shortest blog post ever for that reason. . . but it’s not.
To expound, the IRS requires that all income be reported. The various Forms 1099 (17 at last count) provide the means of reporting very specific income types that might not be captured elsewhere. If your business paid somebody (other than employees on payroll or for product purchases) the IRS wants to know about it. In fact, business income tax returns now include a question asking if Forms 1099 were filed as required with your signature, under penalty of perjury, certifying your response to be true.
Typically a small business will be most affected by the 1099-MISC. Following are 7 things that are good to know. Who must be issued a 1099-MISC?
- Payments for rent, services, or legal fees are the most common (a few industry specific forms of payment are also reportable)
- Payments of $600 or more
- Payments to individuals (not paid through payroll), businesses, (unless they are incorporated) and attorneys (even if they are incorporated)
How do you obtain the necessary information to complete the form?
- Form W-9, completed by your service providers, includes their tax identification number and federal tax classification. It takes the guesswork out of exactly who needs a 1099. You should have your providers complete this form prior to issuing first payment.
- Your accounting records should include total payments issued in the calendar year
When are the forms filed?
- Must be provided to recipients by January 31st.
- Copies must be submitted to the IRS along with a Form 1096 by February 28th.
More details in the “General Instructions for Certain Information Returns,” Forms 1099-MISC and W-9, are available at www.irs.gov.
The Information guide is over 20 pages. If you’d like help navigating the ins and outs of fulfilling your 1099-MISC filing requirements, or one of the 16 other 1099 forms not addressed here, we’d be happy to help you.
We recommend looking at who your form recipients might be before the year closes. It makes for a smoother January if you already have Forms W-9 completed. When the leaves start to fall and retailers remind us that the holidays are fast approaching, we start thinking about Forms 1099 – and so should you.
This blog was coauthored by:
Christy Fullerton is a paraprofessional in the Akron office of Meaden & Moore assisting small business clients with bookkeeping and accounting needs. She is a certified QuickBooks ProAdvisor and will on occasion sort receipts from a shoe box. She enjoys reading, traveling and walking her puppy.