1099s already? Start thinking about them now

Your Guide to State, Local, Federal, Estate + International Taxation

1099s, tax, businessEvery year, Christmas decorations seem to show up earlier and earlier at stores. We all know those people that get upset with anything Christmas related showing up before Thanksgiving. In some ways I feel like I am doing the same thing with this blog. I can just imagine people saying, “1099s? The year’s not even over yet!” Well hear me out; by starting to think about them now, you may be able to save yourself some trouble later on. Generally speaking, 1099s are pretty straight forward to prepare; however, if you wait until the last minute, it can be a hassle to determine who needs them and to hunt down the required information. So it’s worth looking into now to see whether or not you’ll need to file any and see if you have all the information you will need.

With a few exceptions, you will need to prepare a 1099 for anyone (excluding employees) that you paid in the course of your trade or business $600 or more. Some common exceptions to filing 1099s are:

  • Payments made to entities that are corporations (or LLCs taxed as corporations)
  • Payments for goods, telephone services, freight, shipping, etc.
  • Payments made by credit card

When issuing 1099s, you will need the recipient’s name, address and Social Security number (or employer identification number). You can easily obtain all of this information by asking your vendors to fill out a Form W-9 (you can find one here). Getting W-9s after the fact can sometimes be difficult. A good policy that I have seen some companies enact is to not pay a vendor until the vendor gives them a completed W-9. Penalties for 1099s can really add up, so if you are required to file any, be sure to get the necessary information and file on time!

Richard Christensen