December 22, 2021
If you have hired independent contractors to perform services for your company, and paid them each $600 or more for the year, the law requires issuing a form 1099 to the worker and the IRS by January 31st, 2022 at the latest.
Most of the time, a 1099 is not needed to be issued if the independent contractor or service provider is a corporation. Except for attorneys’ legal fees of $600 or more, it must be reported, even if they are a corporation.
To issue the forms 1099, you’ll need the worker’s name and tax identification number. However, it is not uncommon to hire an independent professional early in the year for less than $600, but then use them again later during the year and end up with a total for the year of $600 or more. Assuming you missed some information from the individual, such as the worker’s full name and their tax identification number, needed to complete the form 1099 for the year, you might experience some issues getting the needed information afterwards. Hence, it is a great practice to request your independent contractors to complete and sign the IRS form W-9 prior to starting the work or of being paid. Making sure each of your workers filled out Forms W-9s prevents you the chance of any omissions and penalties from the IRS.
The IRS provides Form W-9 so you can gather the information needed to file the 1099s for your independent contractors.
The Form W-9 needed information comprise the individual’s name, address, business type, and TIN (Social Security number or an Employer Identification Number), including certifications such as the ID number and citizenship status. It also helps you to verify if you followed the law in case the worker or service provider gives you inaccurate details. You can either print out or fill out on-screen the form, then print it out from the IRS’ website. Note that the W-9 is for your own use only and not issued to the IRS. Ensure that you provide the last Form W-9 revised by the IRS in October 2018 to your independent contractors or service providers.
To avoid any IRS penalties, copies of the Form 1099 need to be sent to the IRS by January 31, 2022, with the transmittal Form 1096. Nevertheless, a company that submits over 250 forms (i.e.: 1099s, W-2s, and 1095s) during the calendar year must file them electronically. The 250-return qualification could be reduced to 100 if the IRS settled with proposed regulations, yet this change wouldn’t be in effect until 2023.
Read our article to learn about if you should classify your workers as contractors or as Employees, and how the IRS determines their tax status + filing.
Our firm offers 1099 preparation services. If you need help or would like to learn more about 1099, please contact our office.
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