Since we’re right at the end of January, it seems like the appropriate time to talk about 1099s, so that’s what this month’s tax tip is about.
These should be sent to anyone that was paid by the business at least $600 for services during the year. This includes rents, services (including parts and materials), prizes and awards, payments to attorneys, etc.
Corporations. Generally corporations don’t need to get a 1099-MISC. However be aware that payments to attorneys, regardless of whether the payment was made to a corporation, should be reported on a 1099.
When. The recipient’s copy should be postmarked by January 31. The copy for the IRS should be postmarked by February 28, although this is extended until the end of March if you file the IRS copy electronically (which is something we do at our office).
Penalties. As with most tax forms, there are penalties for filing these late or not filing them at all.
Corrections. If a contractor notifies you that the information on their 1099 is incorrect (for example, SSN/EIN), they should be issued a new form. If we prepare 1099s for you at our office, we will generally send you the contractor copies first and wait until the end of February to file the government copies. That way we can correct any mistakes early and avoid having to issue corrected forms to the IRS.
The easiest way to get the information necessary to prepare 1099s is to ask for each contractor to fill out a W-9. The best way to do this is to have copies on hand, and ask anyone that might be getting paid $600 by the end of the year to fill one out before they get paid. This saves the headache of trying to track them down in January. I would actually recommend asking every contractor that you use to fill out a new copy every year, which helps catch mistakes like new addresses, new EINs, etc.
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