Getting a Head Start on Your Contractor 1099s
Are you looking for a way to take some of the stress out of preparing and filing your 1099s? This year they are due February 1, 2021, AND there is no automatic extension available. Note that some software vendors will require you to submit data sooner than that date to guarantee on-time filing.
Here are three things you can do right now to help things go more smoothly in January:
1. Ensure Your Information is Accurate
While software programs like QuickBooks (QB) can print your forms, it’s up to you to provide accurate information. Start looking now to make sure all the addresses and Social Security numbers or EIN numbers are filled in and correct (did any of your contractors move?). It’s a good idea to update your W-9s every few years, but at least be sure to send them to any contractors you are missing information for.
2. Know Who Needs a 1099
The IRS has a new form this year - a 1099-NEC (non-employee contractor). Be sure you include anyone who provides a service to your business. This includes your traditional contractors, as well as web designers, virtual assistants, lawyers, accountants, cleaners and other service providers. Any of these businesses that provide more than $600 in services to you should receive a 1099. This is also a good time to think about who you’re using as a contractor who really should be classified as an employee – at least going forward.
3. Record Payments Correctly
Look at the payments you’ve made to contractors. First, make sure you have recorded everything in your software, then make sure it’s recorded correctly. Any exact amount reimbursements you’ve made do not need to be reported, but most software programs will need you to put these into a separate account/category in order to exclude these amounts.
If you pay a per diem or a flat amount for expenses, then it should be included on the 1099. Many accounting software programs can track your 1099s but only if you put the proper information into the vendor setup and use the correct accounts for the category to be charged. Now is a good time to run reports and make sure everything looks as it should.
If you don’t want to use your accounting software program, we recommend Adams Tax Forms. If you won’t be using a software program to file your 1099s, you will need to order the summary form 1098 to file with the IRS. This form cannot be downloaded, but you can order it (for free) now from the IRS or purchase at office supply stores.
Many states also require that you file a copy of the 1099 with them. Here’s a list of states that do NOT require this (my home state of Tennessee is one that doesn’t require it – thankfully!).
Need help figuring out who you need to send the form to? Not sure you want the paperwork hassle? Reach out to us today to see how we can help.