As a business owner with employees or contractors, when the new year rolls around, you might be wondering “do I need to issue a 1099 to my workers?” This is an important question to consider, and is something you want to make sure you get right! Below, we’ve answered some common questions for you regarding 1099 form filing. Make sure you’ve consulted with your tax professional for the most accurate information for YOUR business, but these are some general guidelines to follow.
Who should receive one? If you have vendors or subcontractors who you pay to do work for your business, and you paid them more than $600 in cash, checks, or direct payments last year, those individuals (or partnerships, LLCs, or Estates) need a 1099-NEC form sent to them. These are workers who are NOT employees.
Do I need to issue a 1099 to my regular employees, too? Nope – just vendors and subcontractors! Employees who are on payroll will receive a W-2 instead.
What if I paid through a credit card, PayPal, or Venmo? If you paid with a gift card, credit card, debit card, or a third-party payment system (like PayPal or Venmo), you can skip it! The IRS allows these to be excluded from the 1099-NEC form. Your workers will receive a Form 1099-K from the third-party network or card issuer. Note that if you used a PERSONAL Venmo account to pay someone, you may still need to include these amounts on your 1099 forms. Always check with your bookkeeper or accountant to be certain.
Which form do I use? The IRS has reintroduced the 1099-NEC form for the way to report self-employment income. This form should be utilized now instead of the previously used 1099-MISC form.
When are they due? Forms must be filed with the IRS by January 31 to avoid penalties.
Are there any exceptions? Yes, there are a few. You’ll want to contact your tax preparer to verify which ones apply to your business. In general, the following are exceptions to the rule:
-Contractors who operate as S-CORP or C-CORP
-Vendors of freight, storage, merchandise, or similar items
-Payments of rent to real estate agents, such as property managers
What if I don’t have my contractor’s tax information? When you hire a new contractor, this should be one of your first steps: have them fill out a W-9 form. You can keep this file on hand for tax time. That way, you’ll never have to worry about getting info from them at the last minute. For example: if you hire someone for a small project in March, and don’t have a W-9 on file, it could be a big pain to track them down at tax time the following January! The W-9 ensures that you have your contractor’s mailing information, Tax ID number, and filing status.
Do I have to file 1099’s electronically? Do you have 250+ 1099 forms to file? If not, you can file online or on paper. Have more than that and want to file paper forms anyway? You may be subject to a penalty fee for each return that you fail to file electronically.
Do I have to issue a 1099 to each worker, keep up with my regular bookkeeping, and do everything else my business needs – all at once? Definitely not! Your accountant or bookkeeper can likely handle this task for you each year at tax time. If you don’t have someone to take care of this for you, we can help! Contact us! We’ll be happy to schedule a chat about how we at Symmetrical Solutions can support your business by filing your 1099-NEC forms. We know that as a business owner, you have a million other things on your plate. We’d love to help by freeing up your time so you can focus on the parts of business ownership that YOU care about the most.
Tax season doesn’t have to be a headache every year – tackle those 1099’s now and head into an awesome new year of growth!