Need to understand 1099’s? Here’s the scoop: If you’re not using a credit card or 3rd party processor for payments, then you’ll need a 1099-Misc/1099-NEC.
Think of it as an extra formal receipt that shows both the IRS and your vendor how much was paid – they mark it down as an expense on one end, income on the other.
Don’t believe everything you hear either – even LLCs may require these forms.
Your business may need to issue 1099 forms, such as a 1099-Misc and/or 1099-NEC documents. This includes any rent or service payments you make of $600 or more to individuals or LLCs that aren’t taxed as corporations – though you’ll want the recipient’s W9 form on hand just in case! Home office rents don’t qualify; this only applies for other types of equipment rentals.
When you’re dealing with vendors, let their names do the talking. If it includes Corp., Inc., PA, PC, or if they are a publicly traded company, there’s no need to collect a W9. Make sure that their full name appears on payments when writing checks for good record-keeping.
Payments made via credit card or PayPal for goods and services don’t need a 1099-Misc form as there is already a paper trail – the vendor may receive a 1099-K from their payment processor instead. However, Venmo/CashApp are unsuitable for business purposes, so you’ll still need to issue them with form 1099-Misc if used. Just remember that issuing this twice means double-counting income – avoid doing so by using third-party processors like Zelle.
If your purchase was solely for physical items with no service component, there is no need to worry about a 1099-Misc form. That’s only necessary when paying someone for services related to your business. For purchases in your personal life, keep the tax forms and paperwork at bay, as 1099s are not required for personal payments.
If you’re submitting paper copies, be sure to file Form 1099-MISC by March 1st of the following year; if filing electronically, make it before March 31st. For Form 1099-NEC, things are even tighter – no extensions allowed, so all parts must arrive at their respective destinations (the IRS or a non-employee) by January 31st. And don’t forget about state taxes too – an additional Copy 1 may also need to be submitted on that date.
Filing 1099 forms is more important than you might think. Not only can the IRS disallow deductions if not filed, but businesses may also face penalties of up to $280 per noncompliant form. Worse still, an intentional disregard for filing requirements could lead to fines as high as 10% of the income reported on that same missed statement. Don’t let hefty fees ruin your business. Make sure all forms are submitted on time each year.
Filing your 1099-Misc forms with the IRS doesn’t have to be a hassle. Track1099 makes it super easy. With their online software, you can easily file and even mail physical copies of each form.
Plus, they take care of electronically filing them directly with the IRS, so you don’t have to worry about missing important deadlines. It’s fast, straightforward, and can even import information directly from your accounting software.
What more could you ask for? Start by creating an account on their website and follow this simple 3 step process: (1) acquire W9s from each vendor, (2) enter those details into Track1099’s online system, then (3) let them take care of e-filing all paperwork to the IRS.
It’s a good idea to ask for W9 information from all vendors, even if you don’t think you’ll be paying them more than $600 this year. We like using the phrase, “Not a dime without a W9”. To remember this critical step, make it a part of your process for paying vendors now. That way, there won’t be any surprises come tax time!
For additional read: 1099-K is a Tattle Tale of Personal Income
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Donna Bordeaux, CPA with Calculated Moves
Creativity and CPAs don’t generally go together. Most people think of CPAs as nerdy accountants who can’t talk with people. Well, it’s time to break that stereotype. Lively, friendly, and knowledgeable can be a part of your relationship with your CPA, as demonstrated by Donna and Chad Bordeaux. They have over 50 years of combined experience as entrepreneurial CPAs. They’ve owned businesses and helped business owners exceed their wildest dreams. They have been able to help businesses earn many times more profit than the average business in the same industry and are passionate about helping industries that help families build great memories.