What is a 1099?
Many business owners ask us, what is a 1099?
First lets start out and talk about why 1099’s are needed
Whenever a vendor performs work and RECEIVES money , the recipient should expect to receive a 1099 which shows the amount of money received. Sending this form to the recipient will allow the payee to claim it as a expense and the recipient will have to claim that money as income. If you have paid a vendor atleast $600 in a calendar year. That Vendor should receive a 1099
How are 1099’s issued?
1099’s are filed with the IRS and the deadline to file 1099’s are January 31, of every year
What Information Do I Need To Collect In Order To Issue a 1099?
The IRS makes it easy to collect this information. You should give every single vendor a form W9 to complete so that they can provide you with their Tax ID or Social Security Number. Here is a link to form W9 which should be completed by every single vendor at the time of service.
What Happens If I Don’t File 1099’s On Time Or At All?
The penalties can be steep. If you are 30 days late you can expect a penalty of $100 per non filed 1099. After 30 days that can jump up to $260 per non filed 1099. And if the IRS deems it as intentional disregard, that can run you up to $530 per non filed 1099
Exceptions To Who Should Receive a 1099
If you are SCorp member, you should not receive a 1099. Although SCorps are not required to receive 1099’s you should still collect a W9 from these vendors. You may be asking yourself why? Let’s say a Vendor tells you that they are SCorp and then later down the road you discover that they are not a SCorp…..you are still on the hook for the 1099. Having this form on file will save you the penalties and headache.