January 31 is the deadline for issuing Form 1099-MISC. But don’t wait until the last minute to realize that your vendor list is incomplete. Downtime during the holidays is a perfect time to get your information in order. Here are 6 steps that will make issuing 1099s easier this year and in the future:
- Check your vendor list. Each non-corporation to whom you paid $600 or more in services (including materials or parts related to that service), rents, prizes, awards, or other income in the course of business qualifies for a Form 1099-MISC. Include lawyers or legal firms to whom you paid more than $600, even if they are a corporation.
- Look for exceptions. Delete from your list: real estate agents/property managers to whom you paid rent, sellers of merchandise, freight, or storage, and contractors who performed work for you personally (not related to your business).
- Handle non-U.S. workers differently. If a non-U.S. citizen performs work for you inside the U.S., then they must also complete a FormW-8BEN, and you will issue a Form 1099 for the wages paid.
- Get your forms. Form 1099-MISC isn’t downloadable, so you need to purchase the forms from an office supply source, or pick them up for free from an IRS service center .
- Keep your list up-to-date by requiring a Form W-9 from all current and future vendors. When forms are returned, look for federal tax classification to determine whether or not to issue a Form 1099. If you use QuickBooks, indicate 1099 eligibility in the Tax Settings tab.
- File Form 1096 with the IRS by February 28 or electronically by March 31. The month between issuing Form 1099 and reporting them to the IRS on a 1096 gives you time to make any necessary corrections.
Failure to issue Forms 1099-MISC on time can be costly. Based on how long you delay, penalties run from $30 to $100 per form. If you disregard the requirement entirely, the minimum penalty is $250 per statement.
If you want to outsource issuing Form 1099-MISC, talk with Christina Nichols, Tax Senior,
Salmon Sims Thomas Accountants and Consultants.