1099 Preparation and Filing for Independent Contractors
This month in the Small Business Monthly “Financial Fitness” column, Karen Stern, Partner in Charge of the Brown Smith Wallace Entrepreneurial Services Group, discusses some items to keep in mind as small businesses begin to prepare to issue 1099s for the coming tax season.
If you hire independent contractors, freelancers or vendors and pay them more than $600 in business-related payments, then you’ll need to prepare and issue an IRS Form 1099-MISC. If you’re a business owner or independent contractor, it’s important to determine if you will need to issue or file these tax forms.
Below are some items to keep in mind as you begin to prepare to issue and file 1099s for the 2019 tax season:
- Requirements. 1099 forms only need to be sent for services provided for a business, not for goods or merchandise. 1099s also do not need to be sent for non-business, personal services. If a company paid for services using a credit card or third-party payment network, the rules for 1099-K are applicable for reporting.
- W9s. The IRS requires Form W-9, Request for Taxpayer Identification Number (TIN) and Certification to be used when collecting the required tax identification information from your vendors and independent contractors. You should request updated W-9s annually to ensure you have the most updated information.
- TIN matching. Correct W-9s are the key to correct 1099s. To avoid possible matching notices with the IRS, it’s important to ensure that the official name on the W-9 that corresponds with the TIN matches exactly what is on file with the IRS.
- Deadlines. For a specific year’s payments, companies must send 1099s to recipients by January 31 of the following year. Companies must also send copies of each 1099 form that is issued to the IRS. Keep in mind that your state may also have requirements and separate deadlines for reporting 1099s and filing them.
Preparing and filing 1099s can be a tedious process, and many companies are beginning to outsource this function. If you have any questions about 1099 filing requirements or need assistance with electronic filing, please contact Karen Stern, Partner in Charge, Entrepreneurial Services Group, at 314.983.1204.