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Six Steps to Stress-less 1099s

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:

  1. 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.
  2. 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).
  3. 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.
  4. 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 .
  5. 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.
  6. 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.